What the Energy Bill Relief Scheme means for your business

22 Sep 2022 What the Energy Bill Relief Scheme means for your business

Here’s a sentence you won’t have seen for a while: there’s some good news about energy prices!

You’ve probably seen something about the Energy Bill Relief Scheme for businesses. We just wanted to give a quick explainer of what it means for our energy customers.

There’s been so much concern about energy bills in households and businesses alike. Hopefully, this will make the winter a little easier. First off, some bullet points. Hopefully that’ll make it a little more digestible.

Overview

• The Scheme applies to all UK businesses, registered charities and public sector organisations.
• The Government announced it on 21^st It follows the Energy Bills Support Scheme for households. The Relief Scheme for business came later because of regulatory complexities.
• It acts as a cap on wholesale prices. These are a significant factor in energy prices, but not the only factor.
• Still, it will make a difference. Without any intervention, wholesale prices would be more than double the cap.

Pricing details

• Without the Scheme, wholesale energy prices were expected to reach around 60p/kWh for electricity and 18p/kWh for gas.
• With the Scheme, wholesale energy prices will be capped at 21.1p/kWh for electricity and 7.5p/kWh for gas.
• Your discount will reflect wholesale costs at the time you signed.
• The maximum discount will be 40.5p/kWh on electric and 11.5p/kWh on gas.
• These capped wholesale prices will not be the final price for energy customers. As I mentioned earlier, there are other factors in the final unit price. But it will limit the price increases that providers have to pass to consumers.

Timing details

• The Scheme only applies to energy contracts signed on or after 1^st April 2022.
• It covers energy usage for from 1^st October 2022 to 31^st March 2023.
• After this period, the Government will focus support on “vulnerable” industries – so far it hasn’t defined these.
• The Government says it will review the Scheme in 3 months to assess its effectiveness. We are expecting more clarity at this point, on whether it will continue after March and to what extent.

Do you have to apply for the Scheme?

No. If you’re an energy customer of One Connectivity and you signed after 1^st April, we’ll automatically apply the reduction.

What should you do?

The Scheme gives you a chance to get ahead of the market. We’d recommend looking at your existing deal and seeing if you can get a better one!

What if you’re out of contract?

Out-of-contract rates will still have a discount applied, but it’s likely to be less than the discount for in-contract rates.

If you’re out of contract, the Government advice is to set up a contract now. Then you’ll automatically have the reductions applied for the duration of the Scheme.

What if you’re about to sign a contract?

The reduction will still automatically apply.

What if you signed before 1^st April?

If you signed before 1^st April, you won’t be eligible for the Scheme.

Example

Let’s give an example to show what the Scheme might mean in real terms.

• A pub uses 4 MWh of electricity and 16 MWh of gas a month.
• They signed a fixed contract in August 2022, giving them a current monthly energy bill of about £7,000.
• At the time they signed their contact, wholesale prices for the next 6 months were expected to be higher than the government supported price of £211/MWh for electricity, and £75/MWh for gas. This means they can receive support under this scheme.
• The difference between expected wholesale prices when they signed their contract and the government supported price is worth £380/MWh for electricity and £100/MWh for gas, meaning they receive a discount of £3,100 per month.
• This reduces their bill by over 40%.

Want more information?

There are more examples and details of the Scheme on the Government website here:

https://www.gov.uk/government/news/government-outlines-plans-to-help-cut-energy-bills-for-businesses

If you’d rather talk to a person, or are interested in a new business energy supplier, get in touch with One Connectivity today. It’s a stressful time for businesses and households alike, but hopefully this will help avoid the worst.

You can call us on 0115 896 8860.