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Government Energy Bill Relief Scheme

Energy Bill Relief Scheme: Discount for Non-Domestic Customers

The Department for Business, Energy and Industrial Strategy has announced a new ‘Energy Bill Relief Scheme’ for non-domestic energy users.

It means that all UK businesses, the voluntary sector e.g. charities, as well as organisations in the public sector such as schools, councils and hospitals, will be given a discount on wholesale gas and electricity prices.

What does the scope of the Government scheme mean for your business, or your client’s energy bills?

  • All fixed contracts agreed on or after 1 April 2022, as well as deemed, variable and flexible tariffs and contracts, are included.
  • It will initially for a six-month period and apply to energy usage from 1 October 2022 to 31 March 2023.
  • The savings will first appear in October bills which are usually received in November.
  • The government will set a reduced price per unit of gas and electricity. The Supported Wholesale Price is expected to be £211 per MWh for electricity and £75 per MWh for gas. For comparison, wholesale costs in England, Scotland and Wales for winter 2022 are expected to be around £600 per MWh for electricity and £180 per MWh for gas; a 64% and 58% reduction.
  • Please note this is not the price customers will pay; so please communicate this accordingly. The price customers pay will be the combination of the Wholesale Prices (the commodity costs where the government relief will be applied) and their Transmission and Distribution Costs (non-commodity costs which vary site by site).
  • The relief will include the removal of green levies, paid by non-domestic customers and is equivalent to the wholesale element of the Energy Price Guarantee for households. The amount of price reduction each business receives will depend on their contract type and circumstances.
  • Non-domestic suppliers and customers must not profit from the scheme, so there may be exclusions to the relief. For example, a business that uses gas or electricity for the purposes of generating or storing power.

 

What if you, or your client’s business, are on a Fixed Price Contract?

Non-domestic customers on existing fixed price contracts will be eligible for support provided the contract was agreed on, or after, 1 April 2022.

If the wholesale element of the price the customer is paying is above the Government Supported Price, then their per unit energy costs will automatically be reduced by the relevant p/kWh for the length of the Scheme.

Any business entering new fixed price contracts after 1 October 2022 will receive support on the same basis. Please note it applies to the unit rates only. Standing charges will be billed, in addition to these unit rates, according to the contract in place with the supplier.

 

What if you, or your client, are on a Flexible Contract?

It is yet to be clarified if flexible purchase contracts are included.

For businesses on flexible purchase contracts, the amount of reduction offered will depend on the difference between your monthly weighted average baseload price and the government supported price.

This will be determined by your individual procurement strategy and calculated by the suppliers, according to contract specifics.

It will be limited to the Maximum Discount (please carry-on reading, to which this is explained further down).

 

What if you, or your client’s business, are on a Deemed Contract?

Non-domestic customers on default, deemed or variable tariffs will receive a per unit discount on energy costs. This will be up to a maximum of the difference between the Supported Price and the average expected wholesale price over the length of the Scheme.

The Maximum Discount is predicted to be approximately £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments.

Non-domestic customers on default or variable tariffs will pay lower bills, but these will change over time and may still be subject to price increases.

 

What do SystemsLink advise?

If your business, or your client’s business, are out of contract and have been waiting to see the details of the government support, you should now proceed and set up your next supply agreement as normal. The appropriate reductions will be automatically applied by your supplier for the duration of the scheme.

The government says it is working with suppliers to ensure all non-domestic customers in England, Scotland and Wales can switch to a fixed contract/tariff for the length of the Scheme if they wish.

 

Are non-domestic organisations in Northern Ireland eligible for the Scheme?

No.

Businesses in Northern Ireland will have a similar parallel scheme set up based on the same criteria, and this will offer comparable support, but apply the different market fundamentals.

 

What if your business, or your clients, don’t use electricity or gas?

The Government has said that equivalent support will be provided to businesses not connected to either the gas or electricity grid, who heating oil or alternative fuels. Further details will be announced soon.

 

So, what do you need to do?

In short, nothing. Businesses do not need to do anything or apply to the Scheme to access the support. The p/kWh discount will be applied to bills automatically.

A review of the scheme will take place in three months’ time, of which the government will decide on future support after March 2023.

The review will identify the most vulnerable non-domestic customers and how they can be continually supported.

 

How can SystemsLink help

We always strive to stay ahead of the latest energy market news. So as the Scheme evolves, information is confirmed and updates are made, please keep checking our website blog, LinkedIn and Twitter channels to stay in the loop.

If you have the ICON app, be sure to check this for industry updates for the whole utilities sector.

It’s important to note, that there is room for ambiguity in the scheme, which means that customers may not get all the relief they’re entitled to.

Understanding and staying ahead of the energy market has never been more crucial.

SystemsLink’s MarketEye software provides access to live market prices for a wide range of UK gas and electricity traded markets.

For further information on the Energy Bill Relief Scheme or any help with energy management, please get in touch on: sales@systems-link.com or call 01234 988855.

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