The Energy Bill Relief Scheme (EBRS) will be replaced by the Energy Bills Discount Scheme (EBDS) on April 1, 2023 by the UK government. The new plan will limit the EBDS to £5.5bn, which is a significant reduction from the £18bn worth of the current scheme. It will operate until the end of March 2024. In this article, we will examine the details of the new support programme.
Is my business eligible for the Energy Bills Discount Scheme? Eligible businesses are those on existing fixed price contracts agreed on or after December 1, 2021, new fixed price contracts, deemed/out of contract or standard variable tariffs, flexible purchase or similar contracts or variable Day Ahead Index (DAI) tariffs (Northern Ireland scheme only).
During the 12-month period and up to a limited amount, businesses will receive a per-unit discount on their energy bills. The relative discount will be applied if wholesale prices surpass a certain price limit. The following are typical prices for most businesses:
– £19.61 per megawatt-hour (MWh) with a price limit of £302 per MWh for electricity
– £6.97 per MWh with a price limit of £107 per MWh for gas
Energy-intensive and trade-intensive companies are entitled to greater assistance. The following are the maximum discounts and price thresholds for these sectors:
– £89 per MWh with a price limit of £185 per MWh for electricity
– £40 per MWh with a price limit of £99 per MWh for gas
Most businesses will not need to do anything as their energy provider will automatically apply the discounts to eligible customers’ bills. The discount will be applied in pence per kilowatt-hour. However, energy and trade-intensive sectors will need to apply for greater assistance. The government has not yet released any details about this.
How does the Energy Bills Discount Scheme differ from the Energy Bill Relief Scheme? According to the Federation of Small Business (FSB), 370,000 (28%) of small businesses that registered for fixed price energy agreements last year may need to downsize, rethink their business strategies, or even cease operations entirely after the current energy assistance concludes in April. For example, a pub that signed a contract in August 2021 for 48,000 KwH in electricity and 192,000 KwH in gas will pay £24,528 a year for energy under the current support scheme. However, under the new scheme, it will be paying £82,539.
The FSB has urged small companies to be able to renegotiate or “blend and extend” their energy agreements signed last year to take advantage of the cheaper wholesale prices currently available. Tina McKenzie, policy chair of the FSB, said, “This cliff-edge will also hit consumers as businesses will have to raise prices to cope with soaring bills, driving up inflation.”
Should I choose a fixed-price energy deal? If you are near the end of your current energy contract, it is an excellent opportunity to evaluate and lock-in the best fixed rate. According to Ed Whitworth, head of energy performance at Bionic, although the discount scheme is available to all non-domestic customers on contracted, deemed, and out-of-contract rates, it is still worth comparing energy quotations and fixing your rates. “Fixing your rates will guarantee bill stability in what’s still an uncertain market by locking in a consistent price for your energy,” he stated.