The government has confirmed the details of a new energy discount scheme for businesses, charities and the public sector, ahead of the current Energy Bill Relief Scheme ending in March 2023.
The scheme will run until 31 March 2024, and aims to help businesses locked into contracts signed before recent substantial falls in the wholesale price, and provide others with reassurance against the risk of prices rising again.
Businesses in sectors with particularly high levels of energy use and trade intensity will receive a higher level of support. We’ve got the details here.
Why is the current scheme being replaced?
The incumbent Energy Bill Relief Scheme provided an “unprecedented” package of support for non-domestic users through this winter, worth £18 billion. The government has been clear that this was a time-limited intervention, and the latest data shows wholesale gas prices have now fallen to levels just before Putin’s invasion of Ukraine and have almost halved since the current scheme was announced.
The government says the new scheme “strikes a balance between supporting businesses over the next 12 months and limiting taxpayer’s exposure to volatile energy markets,” with a cap set at £5.5 billion.
The Chancellor of the Exchequer, Jeremy Hunt, said: “Even though prices are falling, I am concerned this is not being passed on to businesses, so I’ve written to Ofgem asking for an update on whether further action is action is needed to make sure the market is working for businesses.”
Details of the new scheme
For eligible non-domestic customers who have a contract with a licensed energy supplier, the government has announced the following support:
- From 1 April 2023 to 31 March 2024, all eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill.
- This will be subject to a wholesale price threshold, set with reference to the support provided for domestic consumers, of £107/MWh for gas and £302/MWh for electricity. This means that businesses experiencing energy costs below this level will not receive support.
- Customers do not need to apply for their discount. As with the current scheme, suppliers will automatically apply reductions to the bills of all eligible non-domestic customers.
What about energy intensive businesses?
A substantially higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive – predominately manufacturing industries. These firms are often less able to pass through cost to their customers due to international competition.
For eligible Energy and Trade Intensive Industries (ETIIs), the government is announcing a new “ETII scheme”:
- These businesses will receive a discount reflecting the difference between a price threshold and the relevant wholesale price.
- The price threshold for the scheme will be £99/MWh for gas and £185/MWh for electricity.
- This discount will only apply to 70% of energy volumes and will be subject to a ‘maximum discount’ of £40.0/MWh for gas and £89.1/MWh for electricity.
Which energy intensive industries are eligible for support under the ETII scheme?
Businesses may need to register for the higher level of ETII support and details on how to apply will be released by the government by the end of March 2023.
Energy and Trade Intensive Industries in scope of the additional support are listed on the government website.
The ETII sectors were identified via a government review, as those meeting certain thresholds for energy and trade intensity, in addition to sectors currently included in existing Energy Compensation and Exemption schemes. Energy intensity was based on electricity and gas consumption as a % of a sector’s GVA using ONS data. Trade intensity was based on goods trade using ONS data. To qualify as an ETII sector, the sector had to be above the 80th percentile for energy intensity (i.e., fall in the top 20% of sectors by energy intensity across the UK), and the 60th percentile for trade intensity (i.e., fall in the top 40% of sectors by trade intensity across the UK).
The Energy Advice Hub is powered by Sustainable Energy First, the UK’s leading energy and carbon consultancy. If you would like advice on how the new Energy Bills Discount Scheme affects you, get in touch.