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New business energy bill support scheme from April 2023 – Blog

The UK government’s current Energy Bill Relief Scheme (EBRS) is continuing to offer discounted energy costs for non-domestic consumers of wholesale gas and electricity until the end of March.

This six-month scheme, which started on 1st October 2022
and will end on 31st March 2023, was always intended to be a temporary measure to help businesses continue to operate throughout the cost of energy crisis over the winter.

Now this is coming to an end, the government will be replacing it with the new Energy Bills Discount Scheme (EBDS) from 1st April 2023 until 31st March 2024. This twelve-month scheme will be less generous, as there is no ‘government supported price’ cap, and businesses with energy costs below a certain amount will not qualify.

Here’s how the new energy bill support scheme for businesses will work, and how it could affect your business in the next year.

How will the Energy Bills Discount Scheme work?

Just as the Energy Prices Act 2022 gave the government powers to create the EBRS, the EBDS will also be regulated under this law. While the previous scheme was based on fixed prices, the EBDS will only provide a discount on existing wholesale energy prices.

  • Eligible businesses will receive a discount up to a maximum of £6.97/MWh on gas and £19.61/MWh on electricity.
  • If energy costs are below £107/MWh for gas or £302/MWh for electricity, the discount will not be applied.
  • When the wholesale price is higher than the threshold, the discount will be phased in up to the maximum set for the fuel type.

These per-unit discounts are applied in MWh (megawatt hours), whereas energy is typically billed in kWh (kilowatt hours). The conversion results in a discount of around 2p per unit for electricity and 0.5p per unit for gas, which isn’t much of a reduction.

Who is eligible for the Energy Bills Discount Scheme?

As with the first scheme, the EBDS will be available for all energy consumers on a non-domestic contract. This includes businesses, organisations in the voluntary sector, and public sector organisations – including charities, hospitals, care homes, and schools.

To be eligible, your business must be on an existing fixed-price contract that began on or after 1st December 2021, signing a new fixed-price contract, out of contract on a standard variable tariff, or on a flexible purchase contract.

Again, as per the earlier scheme, eligible customers don’t need to apply. Energy suppliers will apply the reductions automatically, and the government will compensate them for the savings they’re passing on to their non-domestic consumers.

The discount should be detailed on customers’ energy bills in p/kWh (pence per kilowatt hour), with individual bills continuing to vary across different contracts, tariffs, and usage patterns.

What about energy intensive businesses?

Some businesses in Energy and Trade Intensive Industries (ETII) may be eligible for a greater discount, but they’ll have to apply for this level of support. The higher discount only applies to 70% of the energy volume, with the following thresholds:

  • Discount available up to a maximum of £40/MWh on gas and £89/MWh on electricity.
  • Energy costs must be at least £99/MWh for gas or £185/MWh for electricity to qualify.

The government has shared a list of eligible ETII sectors for the higher level of support under the EBDS, and energy suppliers should be sharing application procedures for their business energy customers in due course.

Other energy bill support options for businesses

Though most businesses won’t need to take any specific action to receive the energy bill reduction under the EBDS, all businesses should still be considering how the changes in government support for energy costs will impact their cash flows from April 2023.

To this end, you may also want to look into other energy bill discounts for businesses to make sure you’ve been receiving the support your business has been eligible for, including:

  • Qualifying Financially Disadvantaged Customer (QFDC) – additional reduction for non-fixed-price contracts until 31st March 2023.
  • Alternative Fuel Payment – an automatic one-off payment of £150 for off-grid businesses due by 10th March 2023.

If your business is making the most of government support for energy bills, but you still have concerns about your cash flow, you may benefit from professional accounting services. Contact our accountants in Barnsley and Leeds to learn more about how GBAC could help your business.