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The new business Energy Bills Discount Scheme will replace the current Energy Bill Relief Scheme which is coming to an end on 31 March 2023. The new scheme will offer support to eligible non-domestic energy customers (i.e. businesses, rather than private residences) from 1 April 2023 to 31 March 2024. This includes UK businesses, the voluntary sector (such as charities) and the public sector (such as schools and hospitals).
The new scheme has been designed to help support businesses over the next 12 months whilst at the same time limiting the taxpayer’s exposure to volatile energy markets. A cap has been set at £5.5 billion based on estimated volumes.
What does this change for UK businesses?
Under the old scheme, businesses had access to a government-supported price ceiling of £211 per megawatt hour (MWh) for electricity and £75/MWh for gas. This meant that if your wholesale price exceeded this ceiling, eligible businesses could instead pay the government-supported price.
Under the new scheme, businesses will receive a discount starting when their wholesale price goes over the threshold for the fuel, capped at the maximum discount for the fuel. In effect, this is the same concept as having a price ceiling as before, but now with a maximum amount of discount.
Before, you could pay the government-supported price ceiling no matter your original cost per MWh. Now, if you pay above the ‘ceiling’ or threshold, you receive a discount which lowers your new cost per MWh as close to the threshold as possible, up to the maximum discount.
For electricity, the threshold is £302/MWh with a maximum discount of £19.61/MWh. For gas, the threshold is £107/MWh with a maximum discount of £6.97.
Here are some examples:
- For a business paying £308/MWh for electricity, their discount would be £6/MWh (effectively paying the threshold or soft ceiling price of £302/MWh).
- A business paying £125/MWh for gas would receive the maximum discount of £6.97 (effectively paying £118.03/MWh).
- A business paying £100/MWh for gas would receive no discount.
Does this discount differ by business sector?
The government has also confirmed that a substantially higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive – predominately manufacturing industries. These businesses will receive a gas and electricity bill discount based on a supported price which will be capped by a maximum unit discount of £40/MWh for gas with a price threshold of £99 per MWh and £89/MWh for electricity with a price threshold of £185 per MWh. This discount will only apply to 70% of energy volumes.
As with the original scheme, suppliers will automatically apply reductions to the bills of all eligible non-domestic customers.
Read more about this bill here.
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