Energy costs have skyrocketed during 2022, with many UK households and businesses now paying more than double for their electricity and gas compared to 2021. To help domestic users pay their bills this winter, the government has introduced an energy price cap to keep a lid on prices. The average user’s energy bill is now capped at £2500 per year. However, there is no energy price cap for businesses. Instead, the UK Ggovernment has introduced the Energy Bill Relief Scheme to deliver discounts off expensive wholesale energy prices for non-domestic users.
How does this new scheme work? Read on to find out more about the plan and to discover ways to save on your business’ electricity and gas.
What is the Energy Bill Relief Scheme?
On September 21st, the Government announced its new Energy Bill Relief scheme (EBRS) for non-domestic energy users. The scheme aims to help overcome the energy crisis that has been forcing business closures across the country and it will reduce wholesale gas and electricity costs for UK business energy customers. The EBRS will operate for six months from 1 October 2022 to 31 March 2023, benefitting businesses, SME, charities, and public sector organisations, and is equivalent to the Energy Price Guarantee put in place for households.
Does this energy price cap apply to UK businesses?
The Energy Bill Relief Scheme is NOT a business energy price cap. It is a discount scheme. Businesses will automatically see a reduction off their total energy bills, but there is no limit (a cap) to the sums they will pay. Because of the huge spike in wholesale energy prices, many organisations will still see a significant jump in their energy costs from the same period last year – although their bills will be lower than they would have been if the EBRS was not in place.
How does the Energy Bill Relief Scheme work?
The government has set a Supported Wholesale Price for non-domestic energy. This is the maximum business users will pay per unit for their electricity and gas. For businesses with fixed tariff energy contracts, the rates are 21.1p per kWh for electricity and 7.5p per kWh for gas, which is less than half the wholesale prices anticipated this winter. The EBRS also removes the payment of green levies for businesses who receive support under the scheme.
The EBRS applies to all non-domestic energy users who are:
- On existing fixed price contracts that were agreed on or after 1 December 2021
- Signing new fixed price contracts
- On deemed / out of contract or variable tariffs
- On flexible purchase or similar contracts
The level of price reduction for each business will vary according to their contract type.
Fixed Tariff customers
Businesses on Fixed Tariff contracts are eligible for support as long as their contract was agreed on or after 1 December 2021. Provided that the wholesale element of the price they are paying is above the Government Supported Wholesale Price (SWP), their per unit energy costs will automatically be reduced to match the SWP for the duration of the scheme. Business customers entering new fixed tariff contracts after 1 October 2022 will receive support on the same basis.
Deemed, Default, and Variable Tariff customers
Business energy users on these tariffs will receive a per-unit discount on energy costs up to a maximum of the difference between the SWP and the average expected wholesale price over the period of the scheme. The amount of this ‘maximum discount’ is £345/MWh for electricity and £91/MWh for gas, subject to wholesale market developments.
Non-domestic energy users on default or variable tariffs will pay reduced bills, but the sum they pay per unit will still change over time and may still be subject to price increases. Businesses that don’t want to be exposed to fluctuations in energy market pricing may be better off with a fixed tariff contract for the duration of the EBRS.
Flexible Tariff customers
Flexible Tariff contracts are typically used by the largest energy-using businesses. The level of reduction they will receive will be calculated by their energy supplier on a case-by-case basis and subject to the maximum discount shown above. Once again, businesses that don’t want to be exposed to fluctuations in energy market pricing may wish to consider moving to a fixed tariff contract for the duration of the EBRS.
What happens when the Energy Bill Relief Scheme finishes?
The Energy Bill Relief Scheme ends on 31 March 2023 and the government has announced that the universal support currently offered by the scheme will be converted to targeted support for vulnerable industries. This means some businesses will still receive support after 31 March, but some won’t. The UK Department of Business, Energy and Industrial Strategy has started designing the new, targeted energy bill relief from April 2023 onwards, and is expected to publish the details of this scheme over the next few months.
What can I do to reduce my business energy bills?
- Turn off all non-essential equipment when the business is closed
Even when not in use, ‘vampire’ machines and devices such as computers, printers, and copiers, continue to burn energy in ‘sleep mode’. Turn off everything you can at the end of the business day.
- Conduct an energy audit of your business
You can’t make savings if you don’t know what is using what or where the wastage is. An energy audit runs a fine-tooth comb over the business, revealing all the areas where savings can be made.
- Maintain steady heat and A/C
Don’t fiddle with the heating and A/C controls. Constant adjustment wastes energy and costs money. Set a comfortable temperature and let the thermostat to the rest.
- Switch from electric to gas for heating
Even with the cost of installation, it may work out cheaper in the long run to heat your premises with natural gas than higher priced electricity.
- Keep heating and cooling vents clear
Warm and cool air needs to circulate to be effective. Obstructing the air flow from vents with furniture or other obstacles will make your heating and A/C less efficient and consume more energy.
- Cool down for less
Air conditioning is costly to use, with the typical central A/C unit consuming 3500 watts per hour when running. Other cooling methods, such as desk and ceiling fans run for a tiny fraction of this energy cost. A/C systems also need clean air flow for best efficiency. Changing filters every six months can cut 5 to 15% off your air conditioning’s energy consumption.
- Reduce hot water use
It costs money to heat water. Consider ways to lower the hot water use in your place of business. This means everything from leaky hot water taps to over-filled kettles and unnecessary vehicle cleaning.
- Switch supplier
It may not reduce your business energy consumption, but it could lower the price you pay per unit. If you can switch supplier without incurring a penalty, shop around for the best quote available.
Lastly, the three most effective ways to reduce your business energy bill are to make sure you’re paying the lowest rate of VAT, that you’re on the best electricity and gas tariffs, and that you’re claiming every refund and exemption you’re entitled to. Fortunately, this is easy to do. Simply upload your latest energy bill and use the power of Swoop to find the best tariffs, pay the lowest VAT, and keep your energy costs in check.
Links and sources:
- Energy Bill Relief Scheme: https://swoopfunding.com/uk/blog/energy-bill-relief-scheme/
- Business energy users: https://swoopfunding.com/uk/compare/business-energy/
- Energy price guarantee: https://www.gov.uk/government/publications/energy-bills-support/energy-bills-support-factsheet-8-september-2022