Energy Relief for Businesses Unveiled – with Industry Responses

PLANS FOR a new government support scheme to reduce business energy bills for the next six months have been revealed.

Under the Energy Bill Relief Scheme, the government will limit wholesale gas and electricity prices for all non-domestic customers (including businesses, charities and schools and hospitals).

The price cap 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.

The reductions will be automatically deducted from business customers’ bills meaning they do not need to take any action to receive the support.

The discount will take the form of a Supported Wholesale Price – expected to be £211 per MWh for electricity and £75 per MWh for gas. 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.

Energy Price Reduction

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 will be eligible for support as long as the contract was agreed on or after 1 April 2022. Provided that the wholesale element of the price the customer is paying is above the Government Supported Price, their per unit energy costs will automatically be reduced by the relevant p/kWh for the duration of the Scheme. Customers entering new fixed price contracts after 1 October will receive support on the same basis.
• Those on default, deemed or variable tariffs will receive a per-unit discount on energy costs, up to a maximum of the difference between the Supported Price and the average expected wholesale price over the period of the Scheme. The amount of this Maximum Discount is likely to be around £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments. Non-domestic customers on default or variable tariffs will therefore pay reduced bills, but these will still change over time and may still be subject to price increases. This is why the government is working with suppliers to ensure all their customers in England, Scotland and Wales are given the opportunity to switch to a fixed contract/tariff for the duration of the scheme if they wish, underpinned by the government’s Energy Bill Relief Scheme support
• For businesses on flexible purchase contracts, typically some of the largest energy-using businesses, the level of reduction offered will be calculated by suppliers according to the specifics of that company’s contract and will also be subject to the Maximum Discount.

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

For those who are not connected to either the gas or electricity grid, equivalent support will be provided.

Furthermore, businesses seeking to optimise their energy costs can explore competitive offers through services like Utility Bidder, a platform specialising in energy procurement solutions.

The government will publish a review into the operation of the scheme in three months to inform decisions on future support after March 2023.

INDUSTRY RESPONSE

Crucial Lifeline

James Talman, NFRC CEO

James Talman, NFRC CEO, said: “This is a welcome move from the government at a time when businesses have faced difficult decisions as a result of rocketing energy prices. For many small firms, having this simple and sizeable discount automatically applied to bills will be a crucial lifeline.

“However, it has to be recognised that many businesses will still be forced to spend more on energy than in previous years. Companies with small margins will still see these eroded by the increased cost of energy. At a time when many SMEs are worried about survival, this may simply be too little, too late for some firms who have struggled for months without relief. The government must now ensure that after the six-month period for which these measures are promised, businesses are not left to bear rising costs alone once again.

“NFRC members have faced spiralling material price increases, combined with added pressures such as labour shortages, over the past 18 months, and energy costs present an immense challenge that can push businesses, particularly SMEs, over the edge. Clearly it is essential that businesses are given certainty, and should know what to expect for their energy costs for longer than six months. As soon as possible, the government should set out plans for after the six month period. Small businesses will not survive otherwise.

“The construction supply chain must also play its part, by ensuring all sub-contractors and suppliers are paid promptly and in full, and by ceasing the use of retentions in new contracts now, not waiting until 2025. Our members can’t invest in skills and competency essential to our sector’s prosperity on top of additional cashflow issues.”

Sticking Plaster

Brian Berry, Chief Executive of the Federation of Master Builders

Brian Berry, Chief Executive of the FMB, said: “While direct government intervention to help struggling homeowners and businesses with energy bills is welcome, it is ultimately a sticking plaster. Long-term, we must improve the energy efficiency of the UK’s leaky homes to reduce their energy use. A nationwide retrofit plan to make our existing 29 million homes greener and more energy efficient would help slash energy bills and create a pipeline of work for local builders, delivering the growth that the Chancellor rightly prioritises.

“In the immediate term, removing VAT on repair, maintenance and improvement work would help builders pass on savings to cash strapped customers who the latest FMB data tells us, are beginning to turn away from investing in home improvements.”

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