Energy Bills Discount Scheme announced from 1 April 2023

News article

New energy scheme for businesses, charities, and the public sector has been confirmed ahead of the current scheme ending

The United Kingdom goverment has announced a new energy scheme for businesses, charities, and the public sector, ahead of the current scheme ending in March 2023. The new Energy Bills Discount Scheme (EBDS) will mean all eligible UK businesses and other non-domestic energy users will receive a discount on high energy bills until 31 March 2024.

This will help businesses locked into contracts signed before recent substantial falls in the wholesale price manage their costs and provide others with reassurance against the risk of prices rising again.

The current Energy Bill Relief Scheme (EBRS) currently provides a discount on wholesale gas and electricity prices for all non-domestic consumers. This includes public sector organisations, voluntary sector organisations like charities, and businesses.

The scheme came into effect on 1 October 2022 and was was designed as a temporary six-month measure to protect non-domestic consumers from soaring energy costs, cutting the cost of power bills and providing them with the certainty they needed to plan through the acute crisis this winter.

The latest data shows wholesale gas prices have now fallen to levels just before the invasion of Ukraine and have almost halved since the current scheme was announced.

The new scheme therefore strikes a balance between supporting businesses over the next 12 months and limiting taxpayer’s exposure to volatile energy markets, with a cap set at £5.5 billion based on estimated volumes.

The EBDS will run for 12 months from 1 April 2023 to 31 March 2024.

Eligibility for Energy Bills Discount Scheme

As with the original scheme, the new scheme will be available to everyone on a non-domestic contract including:

  • businesses
  • voluntary sector organisations, such as charities
  • public sector organisations such as schools, hospitals, and care homes

who are:

  • on existing fixed price contracts that were agreed on or after 1 December 2021
  • signing new fixed price contracts
  • on deemed / out of contract or standard variable tariffs
  • on flexible purchase or similar contracts
  • on variable ‘Day Ahead Index’ (DAI) tariffs (Northern Ireland scheme only)

The amount your bills will be reduced

As per the current scheme the government will provide a discount on your gas and electricity unit prices. Eligible non-domestic consumers will now receive a per-unit discount to their energy bills during the 12-month period from April 2023 to March 2024, subject to a maximum discount. The relative discount will be applied if wholesale prices are above a certain price threshold. For most non-domestic energy users in Great Britain and Northern Ireland these maximum discounts have been set at:

  • electricity - £19.61 per megawatt hour (MWh) with a price threshold of £302 per MWh.
  • gas - £6.97 per MWh with a price threshold of £107 per MWh

The discount is calculated as the difference between the wholesale price associated with an energy contract and the price threshold. The discount is phased in when the contract’s wholesale price exceeds the floor price, until the total discount per MWh reaches the maximum discount for that fuel.

Recognising that some non-domestic energy users in Great Britain and Northern Ireland are particularly vulnerable to high energy prices due to their energy intensive and trade exposure, (referred to as Energy and Trade Intensive Industries or ETIIs), these sectors will receive a higher level of support, subject to a maximum discount. This discount will only apply to 70 per cent of energy volumes.  The maximum discounts and price threshold for these sectors are:

  • electricity - £89 per MWh with a price threshold of £185 per MWh
  • gas - £40 per MWh with a price threshold of £99 per MWh

For a full list of businesses in scope, see the list of sectors eligible for the Energy and Trade Intensive Industries (“ETII”) scheme (PDF, 66K).

How it works

Applying the reduction

As with the original scheme, suppliers will automatically apply reductions to the bills of all eligible non-domestic customers.

Eligible ETII customers will have to apply for the higher level of support. Further details on how this will work will be published in due course. If you think your supplier is not applying the discount correctly, you should contact your supplier in the first instance.

The government will compensate suppliers for the reduction in wholesale gas and electricity unit prices that they are passing on to 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.

Examples

The level of support for each organisation will vary depending on type and date of contract.

These are illustrative examples only, based on recent averages of forward wholesale prices. Prices may differ from those experienced in practice.

  • Example 1: A pub - A typical pub uses 16 MWh of gas and 4 MWh of electricity each month. Under the new scheme, it could receive up to £2,280 of taxpayer funded support in the 23/24 financial year.
  • Example 2: A small retail shop - A typical small retail store uses 2 MWh of gas and 1 MWh of electricity each month. Under the new scheme, it could receive up to £403 of taxpayer funded support in the 23/24 financial year.
  • Example 3: A medium sized manufacturing business - A medium sized manufacturer uses 1,600 MWh of gas and 200 MWh of electricity each month. Under the new ETII scheme, it could receive up to £687,120 of taxpayer funded support in the 23/24 financial year.

EBRS legislation, rules and guidance

The Energy Prices Act 2022 provided government with the powers to establish the EBRS, ensure scheme benefits are passed on to consumers, and provide for an effective compliance and enforcement regime. The new EBDS will be set out in regulations made under these powers.


First published 9 January 2023