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Energy Bill Support For Businesses To Be Reduced From April 2023

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Financial support has been cut and replaced with a new scheme offering discounts on wholesale energy prices rather than a fixed cap. The Energy Bill Discount Scheme (EBDS) will typically only be available when wholesale costs are high. 

Not all businesses will be offered the same discount level, with large consumption industries receiving a more significant discount. Here are the businesses eligible for discount: 

  • Commercial businesses (amount of discount depends on industry) 
  • Voluntary sector, such as charities 
  • Public sector, such as hospitals, care homes and schools. 

Eligibility is dependant on: 

  • New fixed price energy contracts (allowing businesses to maximise discount and savings) 
  • Those on existing fixed price energy contracts agreed on or after 1 December 2021 
  • Businesses on deemed or out-of-contract variable tariffs 
  • Flexible purchase contracts 

This new scheme will begin in April 2023 and run until March 2024. 

How Much Is The Business Energy Discount? 

The Energy Bill Discount Scheme (EBDS) is applied directly to wholesale unit prices. This will automatically be applied before you receive your business energy bill for 12 months. The discount is relative to wholesale prices above a certain price. 

  • Electricity will have a maximum discount of £19.61 per MWh with a price threshold of £302 per MWh. 
  • Gas will have a maximum discount of £6.97 per MWh with a price threshold of £107 per MWh. 

The discount will be calculated based on the difference between wholesale energy prices with an energy contract and the government-backed price. 

Energy-intensive industries will receive higher discounts: 

  • Electricity will have a maximum discount of £89 per MWh with a price threshold of £185 per MWh. 
  • Gas will have a maximum discount of £40 per MWh with a price threshold of £99 per MWh. 

Who are the energy intensive businesses? 

Eligible energy-intensive businesses will have to apply for higher energy discounts. All other businesses will receive the standard discount automatically.  

What Does This Mean For Small Businesses? 

The relative discount will be applied if wholesale prices are above a certain price threshold. The scheme means discounts will be phased in when wholesale energy prices exceed the floor price until the total discount reach the maximum cap. This means energy prices can still fluctuate and securing a fixed-rate deal at the right price will help maximise savings. 

As the discount will be variable based on the type of contract and wholesale energy prices. This can make it difficult for small business owners to understand exactly what discount they can expect. Here are a few examples of how the energy bill discount will work: 

A pub 

Annual Gas Usage (kWh)

Annual Electricity Usage (kWh) 

Estimated Annual Discount 

192,000 kWh 

48,000 kWh

£2,279.52

Small retail shop 

Annual Gas Usage (kWh)

Annual Electricity Usage (kWh) 

Estimated Annual Discount 

24,000 kWh 

12,000 kWh

£402.60

Medium sized manufacturing business 

Annual Gas Usage (kWh)

Annual Electricity Usage (kWh) 

Estimated Annual Discount 

1,600,000 kWh 

200,000 kWh

£687,120

*1 MWh = 1,000 kWh 

Source: GOV.UK

Why Is Business Energy Support Being Reduced? 

The cost of the Energy Bill Relief Scheme ending in March is unsustainably expensive, according to Chancellor Jeremy Hunt. Even with wholesale energy prices lower than before the Russian invasion, they are still much higher than the long-term average. 

The good news is that wholesale energy prices have been trending downward due to a mild European winter. 

Can I Switch Business Energy Suppliers? 

Yes. The business energy switching market is open for business. With prices still fluctuating, many business owners are choosing a fixed-rate deal for peace of mind and to maximise the discount placed on wholesale prices. 

 

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