A new replacement energy scheme for business was unveiled by the Government on 9th January, ahead of the current scheme ending in March 2023.
The new scheme will start from 1st April 2023 and is due to end on 31st March 2024 and will see business support scaled back. Instead of a cost cap, as under the current scheme which runs to the end of March 2023, firms will get a discount on energy prices.
With UK businesses facing a possible recession and high inflation, many will be nervous to see a reduction in Government support. Fortunately, the winter has been relatively mild, so far, and this has resulted in recent falls in some wholesale energy prices and it is important the Government ensures costs savings are passed onto struggling business and consumers.
What does the new Energy Bills Discount Scheme mean for my business?
For eligible business customers with a contract from a licensed energy supplier, the key Government announcements were:
- From 1st April 2023 to 31st March 2024, all eligible customers will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill.
- This will be subject to a wholesale price threshold, set with reference to the support provided for domestic consumers, of £107/MWh for gas and £302/MWh for electricity. This means that businesses experiencing energy costs below this level will not receive support.
- Customers do not need to apply for their discount. As with the current scheme, suppliers will automatically apply reductions to the bills of all eligible non-domestic customers.
A higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive – mainly manufacturing industries. For these eligible Energy and Trade Intensive Industries, the key Government announcements were:
- Eligible Energy and Trade Intensive businesses will receive a discount reflecting the difference between a price threshold and the relevant wholesale price.
- The price threshold for the scheme will be £99/MWh for gas and £185/MWh for electricity.
- This discount will only apply to 70% of energy volumes and will be subject to a ‘maximum discount’ of £40.0/MWh for gas and £89.1/MWh for electricity.
The Chancellor Jeremy Hunt also advised he has written to OFGEM, asking for an update of its review into the non-domestic energy market. He wants to check if further help is needed for business customers following reports of challenges in relation to the pricing and availability of tariffs, standing charges and renewal terms, and the ability of certain sectors to secure contracts. He has asked for an update in time for the Budget on 15th March and we will bring you full details of any additional help which may be made available, together with a full update of Budget announcements.