UK Energy Bill Relief Schemes

'New support for households, businesses and public sector organisations facing rising energy bills in Great Britain and Northern Ireland has been unveiled by Business Secretary Jacob Rees-Mogg today (Wednesday 21 September 2022) – supporting growth, preventing unnecessary insolvencies and protecting jobs."

[edit] Energy Price Guarantee for households:

Under the plans, a typical UK household will pay no more than £2,500 a year on their energy bill for the next two years from 1st October, through a new Energy Price Guarantee which limits the price suppliers can charge customers for units of gas. This takes account of temporarily removing green levies, worth around £150, from household bills. The guarantee will supersede the existing energy price cap.

Saving the average household £1,000 a year based on current energy prices from October, in addition to the announced £400 energy bills discount for all households, together bringing costs close to where the energy price cap stands today.

The new guarantee will apply to households in Great Britain, with the same level of support in Northern Ireland Households who do not pay direct for mains gas and electricity – such as those living in park homes or on heat networks – will be no worse off and receive support through a new fund.

How the Energy Price Guarantee (EPG) and Energy Bills Support Scheme will be applied to energy bills in Northern Ireland

[edit] Energy Bills Support Scheme for households

The government also announced further details on the previously announced Energy Bills Support Scheme (EBSS) to ensure that the £400 discount to households starting from October will also be available to the 1% of households who would not otherwise have received this support.

Additional funding is available so the £400 can be extended to include people such as park home residents and tenants whose landlords pay for energy via a commercial contract. The government is committed to ensuring such households receive the same support, introducing legislation to make sure landlords pass the EBSS discount on to tenants.

The government will also provide an additional payment of £100 to households across the UK who are not able to receive support for their heating costs through the Energy Price Guarantee. This might be because they live in an area of the UK that is not served by the gas grid and is to compensate for the rising costs of alternative fuels such as heating oil.

Find out more about the Energy Bills Support Scheme

[edit] Energy Bill Relief Scheme for non-domestic customers

The Energy Bill Relief Scheme, will provide a discount on wholesale gas and electricity prices for all non-domestic customers (including all UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals). This support will be equivalent to the Energy Price Guarantee put in place for households."

"It will apply to fixed contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts. It will apply to energy usage from 1 October 2022 to 31 March 2023, running for an initial 6 month period for all non-domestic energy users. The savings will be first seen in October bills, which are typically received in November."

A Supported Wholesale Price is set up– expected to be £211 per MWh for electricity and £75 per MWh for gas, less than half the wholesale prices anticipated, a discounted price per unit of gas and electricity. This is equivalent to the wholesale element of the Energy Price Guarantee for households. It includes the removal of green levies paid by non-domestic customers who receive support under the scheme.

The level of price reduction for each business will vary depending on their contract type and circumstances:

• Non-domestic customers on existing fixed price contracts, eligible if agreed on or after 1 April 2022 and wholesale element of the price is above Government Supported Price, costs reduced by the relevant p/kWh.
• Customers entering new fixed price contracts after 1 October supported on the same basis receiving a per-unit discount on energy costs, to a maximum of difference between Supported Price and average expected wholesale price. Maximum Discount likely to be around £405/MWh for electricity and £115/MWh for gas.
• Non-domestic customers on default or variable tariffs will pay reduced bills, but still changing over time and maybe subject to price increases. Government working o ensure customers given opportunity to switch to a fixed contract/tariff for scheme, underpinned by the Energy Bill Relief Scheme with a set Maximum Discount.

A parallel scheme, based on the same criteria and offering comparable support, but recognising the different market fundamentals, will be established in Northern Ireland.

If you are not connected to either the gas or electricity grid, equivalent support will also be provided for non-domestic consumers who use heating oil or alternative fuels instead of gas. Further detail on this will be announced shortly.

We will publish a review into the operation of the scheme in three months to inform decisions on future support after March 2023. The review will focus in particular on identifying the most vulnerable non-domestic customers and how the government will continue assisting them with energy costs.

[edit] Demonstrative examples of businesses / organisations

[edit] A pub

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, meaning 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, reducing their bill by over 40%.

[edit] A school

A school uses 10 MWh of electricity and 22 MWh of gas a month. They signed a fixed contract in July 2022, giving them a current monthly energy bill of about £10,000. 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, meaning 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 £240/MWh for electricity and £70/MWh for gas, meaning they receive a discount of £4,000 per month, reducing their original bill by 40%.

[edit] Review

The government will conduct a review of the government Energy Bill Relief Scheme, to be published in 3 months’ time, to assess:

• How effective the scheme has been in giving support to vulnerable non-domestic customers
• Which groups of non-domestic customers (by sector, size or geography) remain vulnerable to price rises, taking into account the latest price position and forward curves, alongside other cost pressures
• Extent to which the scheme could be extended and further targeted, or alternatively replaced with other targeted support for these most vulnerable users
• Intended to have a broad application but there may be limited exclusions, for example businesses that use gas or electricity to generate or store power sold back into the grid, power, pumped hydro or battery stations.
• the supported wholesale prices for gas and electricity under the scheme will be confirmed on 30 September

[edit] Comments

Prime Minister Liz Truss

I understand the huge pressure businesses, charities and public sector organisations are facing with their energy bills, which is why we are taking immediate action to support them over the winter and protect jobs and livelihoods. As we are doing for consumers, our new scheme will keep their energy bills down from October, providing certainty and peace of mind. At the same time, we are boosting Britain’s homegrown energy supply so we fix the root cause of the issues we are facing and ensure greater energy security for us all.

Chancellor Kwasi Kwarteng

We have stepped in to stop businesses collapsing, protect jobs, and limit inflation. And with our plans to boost home-grown energy supply, we will bring security to the sector, growth to the economy and secure a better deal for consumers.

Business Secretary Jacob Rees-Mogg

We have seen an unprecedented rise in energy prices following Putin’s illegal war in Ukraine, which has affected consumers up and down the country and businesses of all sizes. The help we are already putting in place will save families money off their bills, and the government’s plans for businesses, charities and public sector organisations will give them the equivalent level of support. This, alongside the measures we are taking to boost the amount of domestic energy we produce to improve both energy security and supply, will increase growth, protect jobs and support families with their cost of living this winter.

Kate Nicholls, CEO of UKHospitality

This intervention is unprecedented and it is extremely welcome that government has listened to hospitality businesses facing an uncertain winter. We particularly welcome its inclusiveness – from the smallest companies to the largest - all of which combine to provide a huge number of jobs, which are now much more secure. The government has recognised the vulnerability of hospitality as a sector, and we will continue to work with the government, to ensure that there is no cliff edge when these measures fall away.

Martin McTague, National Chair of the Federation of Small Businesses

Small businesses called for decisive action – now the government is delivering. With small firms the least able to avoid closure and 16 million employees relying on them, Ministers have listened to our community and got this big call right. Now it’s up to energy retailers to live up to the high bar set today and make sure this help reaches those on the ground.

Jonathan Geldart, Director General of the Institute of Directors

This is an important intervention by the government and provides much needed short-term reassurance for the numerous firms that are facing soaring energy bills. We look forward to working with the government in the coming months to ensure that further relief is targeted at those industries and sectors whose survival is most threatened by current economic conditions. Ultimately, however, business and government will need to work hand in hand to develop domestic energy sources and reduce consumption and dependency on expensive fossil fuels.

Anthony Impey, CEO of Be the Business

This package of support will give business owners the confidence to take long term investment decisions, which many have been postponing in response to rising prices. They can now focus their efforts on activities that drive growth and productivity, such as adoption of technology and increasing the skills of their employees and management teams.

James Lowman, Chief Executive, Association of Convenience Stores

We strongly welcome the government’s support package which will provide a lifeline for thousands of local shops, enabling them to keep trading and serving their communities. We will continue to work closely with the Department for Business, Energy and Industrial Strategy on longer term solutions to the energy crisis facing convenience stores and other businesses, including ways to incentivise investment in energy efficient technology.

The Food and Drink Federation CEO Karen Betts

We welcome the scope of the government’s Energy Bill Relief Scheme and the speed with which it’s being rolled out. It addresses the largest and most volatile cost pressure facing our industry right now. Although some aspects of the scheme are still to be clarified, it offers relief to food and drink manufacturers across the UK.

Stephen Phipson CEO of Make UK, the manufacturers’ organisation

Industry will warmly welcome the timely announcement of an energy price cap for an initial 6 months for all business users. Government has delivered a scheme which is simple to understand, giving reassurance to the business sector. However as appear prices will likely remain high for many months to come, industry will need support for a longer period to protect jobs and remain competitive, so the further announcement of a review on future support at the 3 month stage is reassuring.

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