Government Energy Bill Relief Scheme Latest Announcement
The government yesterday, 21st September 2022, provided further information on the plans for limiting the wholesale costs for gas and electricity for non-domestic customers.
The Energy Bill Relief Scheme will fix the wholesale prices for gas and electricity but the final rate paid by businesses will not be capped.
This does however allow for a degree of competition to remain in the market. Furthermore, this move supports public sector organisations with Public Contracts Regulations (PCR 2015) compliance. It’s important for all public sector bodies to act in accordance with the procurement regulations and we have a compliant route to market via the Utilities Supplies and Services framework.
The facts and figures for the scheme:
• Energy providers will be allowed to incorporate a capped wholesale price of 21.1p/kWh for electricity and 7.5p/kWh for gas.
• The maximum discount will be 40.5p/kWh on electric and 11.5p/kWh on gas
• The cap only applies to energy contracts signed with suppliers since 1st April 2022
• It will apply to energy usage from 1 October 2022 to 31st March 2023
• The scheme will be reviewed after 3 months with the possibility of an extension beyond the initial 6 months to support “vulnerable businesses”
To be put these figures into context – wholesale costs for this winter are currently landing at around 60p/kWh for electricity and 18p/kWh for gas.
As mentioned previously the wholesale charges are not the entirety of the costs you pay. If you want to find out more about what makes up your final bill you can read our article here.
What are the various scenarios for businesses ?
If you are out of contract now:
The government has advised that you set up a contract immediately, the deductions will automatically be applied for the duration of the scheme.
If you are currently on ‘out of contract rates’ you will only receive a per-unit discount on your costs up to a maximum of the difference between the capped price and the average expected wholesale price over the period of the scheme. You also need to be aware that you will be subject to price increases if your energy provider changes their ‘out of contract’ rates.
If you are looking at signing a new fixed rate contract:
The reduction will still be applied for the period of the scheme and will be done so automatically by the supplier. It is best to plan in advance and not end up on out of contract rates as you could end up paying more.
If you signed before the 1st April:
You will not be eligible for any support available from this scheme as the government has reviewed the market and when rises began to occur. Therefore, if you signed before April the rates you are paying are no where near as high as we’re currently seeing.
If your contract is due for renewal after 31st March:
Energy rates for businesses are not forecast to seeing much relief in price until summer 2025. If you are up for renewal after the scheme ends, then you should get in touch, and we can assess the market and recommend the best time for forward-purchase your next energy contract.
Here is an indicative example of how the scheme could help:
A typical college uses 48 MWh of electricity and 120MWh of gas a month. They signed a fixed contract in August 2022, giving them a current monthly energy bill of about £65,000. When they signed their contract, 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 from this scheme. The government supported price is worth £380/MWh for electricity and £100/MWh for gas, meaning they receive a discount of £26,200 per month, reducing their bill by over 40%.
What’s next:
We are expecting further details to be shared which will help us provide guidance in areas that are slightly more complex than what we have outlined above. We will continue to provide updates as and when information becomes available. In the meantime, please contact us if you have any concerns or would like some impartial advice.