21/09/2022
All non-domestic customers (including all UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals) will be given a discount on wholesale gas and electricity prices by the government, the Department for Business, Energy and Industrial Strategy has announced.
The scope of the Scheme is as follows:
General
- All fixed contracts agreed on or after 1 December 2021, as well as to deemed, variable and flexible tariffs and contracts, are included.
- It will apply to energy usage from 1 October 2022 to 31 March 2023, running initially for a six-month period for all non-domestic energy users.
- The savings will first appear in October bills (typically received in November).
- The government will set a Supported Wholesale Price – likely to be £211 per MWh for electricity and £75 per MWh for gas – which is a reduced price per unit of gas and electricity. For comparison, wholesale costs in England, Scotland and Wales for this winter are currently expected to be around £600 per MWh for electricity and £180 per MWh for gas.
- It is important that customers realise this is not the price you pay. The price you pay is a combination of Wholesale Prices (the commodity costs where the government relief will be applied) and your Transmission And Distribution Costs (non-commodity costs which vary site by site).
- This relief will include the removal of green levies paid by non-domestic customers and is equivalent to the wholesale element of the Energy Price Guarantee for households. The amount of price reduction each business will receive will depend on their contract type and circumstances.
- Non-domestic suppliers and customers must not profit from the scheme, as such there may be limited exclusions to the relief, for example business that use gas or electricity for the purposes of generating or storing power.
If you have a fixed price contract - Non-domestic customers on existing fixed price contracts will be eligible for support provided the contract was agreed on or after 1 April 2022. As long as the wholesale element of the price the customer is paying is above the Government Supported Price, then their per unit energy costs will automatically be reduced by the relevant p/kWh for the length of the Scheme.
- Businesses entering new fixed price contracts after 1 October 2022 will receive support on the same basis. It is important to recognise that this applies to the unit rates only. Standing charges will still be billed in addition to these unit rates, according to the contract you have in place with your supplier.
If you are on a flexible contract
- We are clarifying that all flexible purchase contracts are included.
- For businesses on flexible purchase contracts, the amount of reduction offered will depend on the difference between your monthly weighted average baseload price and the government supported price. This will be determined by your individual procurement strategy and calculated by your suppliers, according to the specifics of your contract. Again, this will be limited to the Maximum Discount (likely to be approximately £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments).
If you are on a deemed contract
- Non-domestic customers on default, deemed or variable tariffs will receive a per unit discount on energy costs. This will be up to a maximum of the difference between the Supported Price and the average expected wholesale price over the length of the Scheme. The Maximum Discount is likely to be approximately £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments.
- Non-domestic customers on default or variable tariffs will pay lower bills, but these will still change over time and may still be subject to price increases.
- If you are out of contract and have been waiting to see the details of this government support, you should now proceed and set up your next supply agreement as normal. The appropriate reductions will be automatically applied by your supplier for the duration of the scheme.
- The government says it is working with suppliers to ensure all non-domestic customers in England, Scotland and Wales can switch to a fixed contract/tariff for the length of the Scheme if they wish.
If you are in Northern Ireland
- For businesses in Northern Ireland, a parallel scheme based on the same criteria and offering comparable support, but recognising the different market fundamentals, will be set up.
If you don’t use electricity or gas
- If your business is not connected to either the gas or electricity grid and you use heating oil or alternative fuels, the government says equivalent support will be provided, with further details being announced shortly.
The mechanics
- The p/kWh discount will be applied to bills automatically. Businesses do not need to act or specifically apply to the Scheme to access the support.
- In three months’ time, a review of the scheme will take place and the government will make a decision on future support after March 2023. In particular, the review will look at identifying the most vulnerable non-domestic customers and how they might continue to be supported.
How will Inspired help
We are continuing to clarify the details and will update you accordingly as the situation evolves – please keep an eye out on email and our website and LinkedIn pages for the latest.
However, there is room for ambiguity in the scheme, which means that customers may not get all the relief they are entitled to.
For clients contracted to Inspired beyond April 2023 or currently extending their contracts beyond this period, we will provide an additional Energy Accounting Service on a complimentary basis which will:
- Verify the relief you receive
- Resolve any issue with the relief you receive with your energy supplier on your behalf
- Ensure that you do not pay for one more unit of energy than you are obliged to
For further information or any assistance with your energy strategy, please contact your Account Manager or get in touch on: [email protected] or 01772 689250.