What does this mean for your company’s gas and electricity bills?
It’s been generally hailed as a success story but the Energy Bill Relief Scheme (EBRS) is coming to a close at the end of this week.
Announced in September 2022 and launched on October 1st in response to unprecedented rising energy costs for businesses that were not subject to a price cap like domestic users, the EBRS supported businesses and public sector organisations by providing a discount on the wholesale gas and electricity prices they paid.
The discounts was applied automatically with the prices for electricity and gas pegged at the following levels:
- Electricity – £211 per megawatt hour (MWh) / 21.1p per kilowatt hour (KWh)
- Gas – £75 per megawatt hour (MWh) / 7.5p per kilowatt hour (KWh)
Without the EBRS being in operation the wholesale costs for non-domestic users in England, Scotland and Wales would have been:
- Electricity – £600 per megawatt hour (MWh) / 60p per kilowatt hour (KWh)
- Gas – £180 per megawatt hour (MWh) / 18p per kilowatt hour (KWh)
The EBRS was not subject to a price cap review unlike the Ofgem price cap for the domestic market and the approach taken by the Energy Price Guarantee.
The government compensated suppliers for the reduction in wholesale gas and electricity unit prices that they passed onto non-domestic customers but suppliers were required to ensure that where discounts were being applied they were subject to the minimum supply price set at the government supported prices for gas and electricity.
We’ve previously written about the replacement – the Energy Bills Discount Scheme (EBDS) which comes into effect on 1st April 2023 for 12 months but we should briefly summarise it here too.
It will apply to non domestic consumers across Great Britain and Northern Ireland and follows the dictum that the level of support in the EBRS would not be replicated in the EBDS but it would strike a balance between supporting businesses and limiting taxpayer’s exposure to volatile energy markets with a cap set at £5.5 billion based on estimated volumes.
That is not to say that EBDS is a business energy price cap – it isn’t – it will instead offer discounted unit rates on all fixed price energy contracts signed on or after December 1st 2021 as well as on deemed and out of contract rates subject to a minimum price threshold.
Businesses working in “Energy Trade intensive industries” will get a bigger relative discount as they have higher energy consumption so their threshold price will be lower. These include companies in the steel, paper, plastics, glass, ceramics, cement or chemicals industries.
“It’s a good bet that energy bills will rise for businesses”
Chris Horner, insolvency director with BusinessRescueExpert, said: “The energy price support schemes, while they are useful and welcome, are also unnecessarily confusing for the average director or business owner.
“The certainty that a discount brings is good but while energy prices are now approaching what they were before the Ukraine conflict began, the lesson of the previous 12 months should be that the energy price market is inherently volatile so there is no guarantee that the current scheme discount will be sufficient over the next 12 months.
“It’s a good bet that energy bills will rise for businesses – although not as quickly as they otherwise would have.
“Corporation tax is rising next month along with several other charges companies have to pay, inflation still stubbornly remains in double digits and interest rates have been raised again.
“2023 is still going to be a difficult year for even the most well-run businesses.”
Increasing energy bills are just one more reason why directors and business owners need to consider what they can do in the next few months to help their prospects.
Once they get a better idea of the business and its circumstances then they can suggest potential solutions. The earlier they get in touch, the more options directors usually have.