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Energy Bill Relief Scheme Explained
The UK is currently experiencing an energy crisis as a result of a variety of factors. The aftermath of both the pandemic and Russia’s invasion of Ukraine have been major contributors. The average prices of both gas and electricity bills have soared as a result. This forced the government to come up with a solution in the form of the Energy Bill Relief Scheme.
In this piece, we’ll be discussing what the Energy Bill Relief Scheme is, who will be eligible for it, and how it works, so read on if you want to find out more.
What Is The Energy Bill Relief Scheme?
The Energy Bill Relief Scheme (EBRS) is a scheme created by the UK government. It is aimed to reduce energy costs for UK businesses and other non-domestic energy users. These include public sector organisations and charities.
This price reduction will apply to wholesale prices of gas and electricity for non-domestic customers. Their energy bills have been significantly inflated due to the increases in global energy prices.
There is a possibility that the EBRS could continue after its initial term. The government will conduct a review by the end of the year to determine the scheme’s effectiveness and how it will affect public finances.
Not all non-domestic energy customers will be eligible to receive the discount, as there are specific criteria that need to be met. This will be discussed in further detail below.
Who Does The Energy Bill Relief Scheme Apply To?
As mentioned above, the EBRS will be available to nearly all non-domestic energy users. This includes public sector organisations like:
- care homes
And voluntary sector organisations like charities and other businesses.
But, they will also need to meet the criteria below to receive the discount provided by the EBRS.
- Businesses that are on existing fixed price contracts agreed on or after 1 December 2021.
- Businesses looking to sign a new fixed-price contract.
- Businesses on deemed or variable tariffs.
Some businesses may be excluded from the scheme, such as businesses that make use of gas or electricity to generate power to sell it back to the grid. Examples of businesses in this segment are grid-level battery storage, pumped hydro, and power stations.
This is because businesses and other consumers should not be making a profit from the scheme. It was created to provide relief on increasingly expensive energy bills and not to help businesses turn a profit. If this ends up happening, the discount received will be refunded, and the consumer may need to pay further penalties.
How Much Of A Price Reduction Will The Energy Bill Relief Scheme Provide My Business With?
The unit cost reductions you can expect to receive will depend on quite a few factors. Your discount will be calculated by taking the wholesale portion of the unit price that you would have paid in the coming months and comparing this to the new government supported price.
The government-supported price for non-domestic energy customers is currently set at:
- £211 per megawatt-hour (MWh) for electricity
- £75 per MWh for gas
While the unit rate for wholesale energy costs is expected to reach:
- £600 per MWh for electricity
- £180 per MWh for gas
Fixed price contracts
If your business is on a fixed contract, the discount you receive will be the difference between the wholesale price you agreed on when you signed the contract and the government supported price.
This only applies to two circumstances. If you signed your fixed contract on or after 1 December 2021 and if you enter into a new fixed-price contract after 1 October 2022. Then, your business will continue to receive support in this manner for the duration of the scheme.
Default, deemed, and variable tariffs
For businesses that are on default, deemed, or variable tariffs, the applicable discount will be the difference between the government-supported price and the current wholesale price.
However, non-domestic customers on these contracts will be subject to a maximum discount of £345/MWh for electricity and £91/MWh for gas. This is to prevent customers from ending up with a credit balance.
The energy price cap places a limit on the amount energy suppliers can charge domestic customers on default tariffs. The price per kWh and standing charges are included within the cap.
Your supplier will charge you accurately based on your gas and electricity usage so the more energy you use, the more expensive your electricity bill will be.
The price cap doesn’t apply to you if:
- You are already signed up for a fixed energy tariff
- You are signed up to your supplier’s standard variable tariff
The latest news suggested that Ofgem may consider reviewing the price cap every 3 months rather than every 6 months, we will provide our customers with an update on this once further information has been released.
Do I Have To Apply For The Energy Bill Relief Scheme?
No, you do not need to apply to receive a discount from the Energy Bill Relief Scheme. You should, therefore, avoid all parties attempting to “help” you receive this discount.
Below we will list how the scheme will apply, depending on the contract that your business is currently on.
Existing fixed price contract
If your fixed price contract that you signed on or after 1 December 2021 is costing you more than the government supported price, then this discount will be applied to your account automatically for the entire duration of the scheme.
You will not receive any discount from the EBRS if your fixed contract currently costs less than the government supported price.
New fixed-price contracts
Non-domestic customers entering into new fixed contracts within the period of the scheme will have the price reduction automatically applied to their bills by their energy suppliers. A discount will only apply if the wholesale unit price is higher than the government supported price.
Default or variable tariff contract
You are still eligible to receive a discount if you are on a default or variable tariff contract; however, as mentioned above, you will be subjected to the maximum discount limit of £345/MWh for electricity and £91/MWh for gas.
This means that if the wholesale prices rise high enough, your energy bill prices will increase. The maximum discount is rigid and will not change regardless of how high energy prices rise, so keep this in mind.
Flexible purchase contract
Non-domestic customers that use the most energy typically make use of flexible contracts. The price reduction that customers will receive on these types of contracts will be calculated by their energy supplier based on the specific details of the company’s contract.
These customers will still be subjected to the maximum discount of £345/MWh for electricity and £91/MWh for gas.
Fixed contract signed before 1 December 2021
If you signed your fixed contract before 1 December 2021, then you will not have been affected by the significant increase in energy costs and will, therefore, not be eligible to receive any discount from the scheme.
If you aren’t currently in a contract and were waiting to see what support the government would provide you before signing one, then you can sign a fixed contract. This makes you eligible to receive the price reduction provided by the scheme.
The energy provided by heat network, landlord, or energy service company
If you don’t pay for your energy bill directly, then you should not expect to see an increase in your energy costs. The government expects businesses and other organisations benefitting from the EBRS to pass these benefits down to the end user in a proportionate way. This will ensure that all UK residents receive relief.
How Long Will The Energy Bill Relief Scheme Last?
The Energy Bill Relief Scheme will last for 6 months, beginning on 1 October 2022 and lasting until 31 March 2023.
The government will conduct a review of the scheme at the end of the term to determine whether the relief scheme should be extended further or not.
The review will take the following details into consideration before a decision is made:
- How effective the Energy Bill Relief Scheme has been in supporting non-domestic customers who were most in need of relief?
- How the government can continue to support these customers? Meaning, whether the scheme should continue past the initial term or whether a new scheme should take its place.
- Which non-domestic energy users were particularly susceptible to energy price increases.
What Does The Energy Bill Relief Scheme Mean For Businesses?
The Energy Bill Relief Scheme will work for non-domestic customers in the same way that the Energy Price Guarantee will work for domestic households.
It will basically protect businesses from receiving the brunt of the energy cost increases that are being experienced globally. This will help many businesses stay afloat and allow many business owners and employees to also benefit from this relief.
Energy prices might be soaring. But you won’t need to worry whether you are a business owner or just a normal consumer. The Energy Bill Relief Scheme and the Energy Price Guarantee will protect you from these exorbitant price increases.
However, while the scheme may help you, it is currently only set to last until 31 March 2023. And there is no guarantee of what will happen after then.
This is why you should consider how much you are actually paying for your energy bills. Here at Business Energy Comparison; we can help you compare business energy suppliers to find the best deal for your business.
You can look at our sectors page and compare the energy costs of your business with other businesses in your sector. This way you can find out if you are getting a fair deal.
Frequently Asked Questions
Who will get help with energy bills?
Both domestic customers and non-domestic customers will receive some form of financial help with their energy bills.
Businesses, public sector organisations, and charities will receive relief from the Energy Bill Relief Scheme. Domestic customers will receive relief from the Energy Price Guarantee, which will save customers around £700 over the course of the winter.
What is the Energy Bills Support Scheme?
The Energy Bill Support Scheme will provide all homes in England, Scotland, and Wales that have a domestic electricity connection with a £400 discount to help with their energy bills over winter 2022 to 2023.
How do I apply for the energy support schemes?
If you are eligible for any of the energy support schemes, then you will not need to apply, as these discounts should be automatically applied to your account.
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