Energy Bill Relief Scheme for business

The government's new Energy Bill Relief scheme provided help for business customers in Great Britain from 1 October 2022 to 31 March 2023. This is replaced with the Energy Bills Discount Scheme from 1 April 2023 until 31 March 2024. 

This is a freeview 'At a glance' guide to the Energy Bill Relief Scheme.

The Energy Bill Relief Scheme (EBRS) provided a reduction in wholesale energy prices, by way of a discount. It follows from the earlier announcement of a similar scheme for Domestic fuel customers. This scheme is replaced by a lower level of discount through the Energy Bills Discount Scheme (EBDS) from April 2023.

The EBRS was expected to provide £18 billion of relief over six months in comparison to £5.5 billion over one year for the EBDS.

How does it affect my business?

The discount was applied directly to bills by energy suppliers, it was based on the difference between:

• The actual price charged.
• A baseline ‘government supported price’.

The discount was:

• Applied as a reduction to energy bills.
• Automatic.
• Non-domestic customers were not required to do anything to benefit from the scheme.

The government has warned that a request for bank details in relation to this scheme is likely to be a scam.

The government's supported price is set lower than currently expected wholesale prices this winter.

Who does this apply to?

• Businesses.
• Voluntary sector organisations (e.g. charities).
• Public sector organisations (e.g. schools and hospitals).

Who are/were:

• On existing fixed price contracts, agreed on or after 1 December 2021 (changed from the original announcement of 1 April 2022).
• Signing new fixed-price contracts.
• On deemed/out of contract or variable tariffs.
• On flexible purchase or similar contracts.
• On contracts paying energy costs above a price threshold.
• On variable 'Day Ahead Index' (DAI) tariffs in Northern Ireland.

How does it work?

Energy suppliers will be compensated for the differential between the actual wholesale unit price and the new supported price, as set by the government. The discount will only apply if the wholesale price rises above the supported price.

The Energy Bill Relief Scheme operated from 1 October 2022 until 31 March 2023. It is replaced by the Energy Bills Discount Scheme from 1 April 2023 until 31 March 2024. The relief provided by the latter is significantly less.

The regulations behind the EBDS were legislated for by the Energy Prices Act 2022, but did not come into force until late April 2023. The discount applies to non-domestic bills from 1 April 2023 and customers should have seen the discount in their May bills.

The supported prices are:

1 October 2022 - 31 March 2023 (EBRS)

• £211 per megawatt-hour (MWh) for electricity (versus the current expected price of £600).
• £75 per MWh for gas (versus the current expected price of £180).
• A comparable rate will be set for Northern Ireland. This will be a separate but consistent scheme.

1 April 2023 - 31 March 2024 (EBDS)

• £19.61 per megawatt-hour (MWh) for electricity once over the threshold of £302/MWh.
• £6.97 per MWh for gas once over the threshold of £107/MWh.

Due to the way domestic and non-domestic pricing differs, this is not the same as the final fixed price per unit which will be offered to domestic customers. The two schemes do, however, offer equivalent levels of support.

• Fixed contracts will include a discount between the supported price and the wholesale price on the day the contract was agreed.
• All other contracts will include a discount between the supported price and the relevant wholesale price. This will be subject to a 'maximum discount' (£302/MWh for electricity and £107/MWh for gas under the EBDS and £345/MWh for electricity and £91/MWh for gas under the EBRS).

Energy and trade-intensive businesses

• More support will be available for businesses that are energy or trade-intensive and less able to pass increased costs on to customers due to the levels of international competition.
• A discount for 70% of energy volumes will be available at a higher rate:
  • £89 per MWh over a threshold of £185/MWh.
  • £40 per MWh over a threshold of £99/MWh.
• Businesses will need to register to be eligible, more information can be found in the Government guidance.
• The list of qualifying business sectors is available here.

Heat Networks

• Additional support will be available for heat network businesses that supply domestic customers.
• Where this is the case, the heat network will be required by law to apply for the support and pass the benefit on to their domestic customers.
• The scheme will provide support to allow a Minimum Supply Price to be achieved. These prices are:
  • Electricity: £340 per MW/h.
  • Gas: £78.3 per MW/h.
• Businesses will need to register to be eligible, more information can be found in the Government guidance.

Non-standard cases

The EBDS does not cover license-exempt suppliers and non-domestic customers who use them. However, equivalent support aligned to the EBDS will be available where:

• Gas or electricity is bought and supplied via a wire or pipe.
• From a Qualifying Energy Provider or acting as a Wholesale Market Customer themselves.
• The price paid is directly linked to wholesale energy prices.

Further guidance is available Here.

Exclusions

Relief will not apply to:

• Businesses using energy to generate power to be sold back to the grid or those profiting from the scheme in ways other than intended.
• Suppliers caught profiting will be required to repay the support received. Non-domestic suppliers and consumers must not profit from the scheme other than for its intended purpose of providing relief on necessary energy bills. Any such activity will result in support being refundable to the government and may be liable to further penalties.

Examples

HMRC have added examples to their guidance to show how the relief will work.

A pub
A pub uses:

• 4 MWh of electricity a month.
• 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 contract, wholesale prices for the next six months were expected to be higher than the government-supported price, meaning they can receive support.

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%.

For 2023-24, the discount will be worth up to £2,280 for the whole year.

A medium-sized manufacturing business
A medium-sized manufacturing business uses:

• 200 MWh of electricity each month.
• 1,600 MWh of gas each month.
• They entered into a fixed contract in August 2022, giving them a current monthly energy bill of around £560,000.

At the time they signed their contract, wholesale prices for the next six months were expected to be higher than the government-supported price, 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 £360/MWh for electricity and £90/MWh for gas, meaning they receive a discount of £215,000 per month, reducing their original bill by more than 35%.

For 2023-24, the discount will be worth up to £687,120 for the whole year.

A small retail shop
A small retail shop uses

• About 1 MWh of electricity each month.
• About 2 MWh of gas each month.
• They are on a variable contract, giving them a current monthly energy bill of around £1,300 per month.

As they are on a variable contract they can receive support up to the maximum discount (£345/MWh for electricity and £91/MWh for gas).

Applying the maximum discount rates means that their monthly energy bill reduces by around 40%, leaving them with a bill of around £800 per month (a discount of roughly £500 per month).

For 2023-24, the discount will be worth up to £403 for the whole year.

Useful guides on this topic

Domestic Energy Price Guarantee scheme
Details of the Energy Price Guarantee that will apply to domestic electricity and gas consumers. This measure also has effect from 1 October 2022, replacing the Price Cap and ensuring that the average annual energy bill will be £2,500 for the next two years. 

External links

Energy Bill Relief Scheme: help for businesses and other non-domestic customers

Energy Bills Discount Factsheet (9th January 2023)

Guidance: Energy Bills Discount Scheme