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Business energy bills capped by government relief scheme

Published:  21 September, 2022

The government has announced a new energy relief scheme that will reduce energy bills for businesses by 50% of expected levels. 

The support package comes into effect from October 1 and will be a huge relief to restaurant and bar groups across the country.

Under the scheme, wholesale prices are expected to be fixed at £211 per MWh (megawatt per hour) for electricity and £75 per MWh for gas.

According to the Department for Business, Energy and Industry, the scheme is eligible for all non-domestic energy customers. It will be effective for six months, with a review after three months and an option to extend for vulnerable businesses.

It will apply to fixed contracts agreed on or after April 1 2022, as well as to deemed, variable and flexible tariffs and contracts. It will apply to energy usage from October 1 2022 to March 31 2023, running for an initial six-month period for all non-domestic energy users. The savings will be first seen in October bills, which are typically received in November.

As with the Energy Price Guarantee for households, customers do not need to take action or apply to the scheme to access the support. Support (in the form of a p/kWh discount) will automatically be applied to bills.

The leading trade body, UKHospitality, reacted to the government plans shortly after today’s announcement (September 21).

UKHospitality CEO, Kate Nicholls, said: “We are relieved that the government has listened to the representations that UKHospitality has stridently delivered, relating to the problems that the sector is experiencing with energy suppliers. This intervention is unprecedented and extremely appreciated as we head into an uncertain winter with numerous challenges on many fronts. 

“The inclusiveness of the support announced today – covering businesses small and large – will be extremely beneficial to the sector. A sector that provides a huge number of jobs, many of which are now more secure. 

“The government – and the prime minister herself, in her comments in New York yesterday – has singled out the vulnerability that energy costs are inflicting on the hospitality sector. Today’s announcement will give businesses some confidence to plan for immediate survival, but we will not relent in our pursuit of a more comprehensive package to safeguard businesses and jobs. The levers of reduced VAT and business rates reliefs are still available to the government, and there must also be a comprehensive package to ensure that there is no cliff edge when these measures fall away.”

How it works:

Suppliers will apply reductions to the bills of all eligible non-domestic customers.

The government will compensate suppliers for the reduction in wholesale gas and electricity unit prices that they are passing onto non-domestic customers.

The discount applied will be in pence per kilowatt hour (p/kWh). The p/kWh government support for comparable contracts will be the same across suppliers, but the absolute level of individual bills will continue to vary across different contracts and tariffs.

For fixed contracts, the discount will reflect the difference between the government-supported price and the relevant wholesale price for the day the contract was agreed. The government will publish the wholesale prices we will use for calculating this for each day from April 1 2022.

For variable, deemed, and all other contracts, the discount will reflect the difference between the government-supported price and relevant wholesale price but be subject to a ‘maximum discount’ determined at the beginning of the scheme.

Businesses on variable / flexible contracts will need to choose if they move to fixed contracts. This is likely to suit you if you don’t want to be exposed to price variation. You will be contacted by your supplier.

The p/kWh government support for comparable contracts will be the same across suppliers, but the absolute level of individual bills will continue to vary.

Third-party intermediaries (TPIs) / energy brokers do not influence the per unit cost reductions applied to energy costs under the scheme. You do not have to take out a new contract or change your contract for appropriate deductions to be applied to your bills automatically.

Business secretary Jacob Rees-Mogg, who unveiled the support package, said: “We have seen an unprecedented rise in energy prices following Putin’s illegal war in Ukraine, which has affected consumers up and down the country and businesses of all sizes.

“The help we are already putting in place will save families money off their bills, and the government’s plans for businesses, charities and public sector organisations will give them the equivalent level of support.

“This, alongside the measures we are taking to boost the amount of domestic energy we produce to improve both energy security and supply, will increase growth, protect jobs and support families with their cost of living this winter.”

Find out about the Energy Bill Relief Scheme here.