Business Energy Support Scheme

22 Sep 2022

The government has announced further details of its energy support scheme for businesses and other non-domestic organisations such as schools and charities.  The support will run from 1 October 2022 to 31 March 2023 and will be automatically applied to bills.  The support takes the form of a discount on the wholesale price for electricity and gas, although the level of support will depend on what type of contract the business has with their supplier.

 Fixed contracts signed on or after 1st April 2022

  • Wholesale power prices are capped at 21.1 p/kWh (Supported Price of £211 MWh)

  • Wholesale gas prices are capped at 7.5 p/kWh (Supported Price of £75 MWh)

Non-commodity costs, risk premium and supplier margins will be added to the wholesale costs (as per existing contract terms)

Those on fixed price contracts signed before 1 April 2022 do not appear to benefit from the scheme although the extent to which this is an issue will of course depend upon contract price.

 Default, deemed or variable tariffs 

  • Default, deemed or variable tariffs will receive a per-unit discount on energy costs, subject to a Maximum Discount (see above)

  • 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

Again, non-commodity costs, risk premium and supplier margins will be added to the wholesale costs (as per existing contract terms)

The result of this is that 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.  The government is working with suppliers to give customers the option to transfer to a fixed price contract for the duration of the scheme.  If and when this facility becomes available business should consider this option carefully as it would appear to provide a greater level of certainty as well as protection from further price rises.

Flexible contracts (purchases on or after 1st April 2022)

This type of contract tends to be used by businesses that have very high levels of energy consumption.  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 review of the scheme will be published in 3 months to allow the government to assess the level of future support needed, including how the Government would identify most vulnerable businesses and continue to assist.

In summary

For those businesses already on a fixed price contract the support will be applied automatically.  While the capped price is certainly a significant help in providing a degree of certainty over fuel bills in the medium term it will still leave many businesses facing significantly higher energy costs this winter.

For those businesses currently on variable price contracts the maximum discount, while helpful, will still leave them exposed to future price rises.  As mentioned above it may be that there is an opportunity to fix to a short-term fixed price contract for the duration of the support package.  Presumably more details will be made available once this option becomes available and we would strongly recommend businesses on variable contracts consider this as an option to provide them with a degree of protection in the event prices do continue to rise.

For those businesses with higher energy usage there may still be opportunities to obtain a better deal on their energy prices.  There may also opportunities for those business in high energy use industries to obtain discounts on some of the green levies added to their bills.  Talking to a reputable energy consultant could unlock some potential savings – if you would like contact details for an adviser who may be able to help please get in touch with us

In times where all costs are rising, understanding the impact of these on your profitability and your cash position is more important than ever.  Speak to your normal WR Partners contact or get in touch using the email address above for details on how we can help to give you the information you need on the current state of your business finances and support you as you take your business forward into the future.  

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