Following our earlier communications on the UK government’s Energy Bill Relief Scheme, and the recent announcements from government, here is a summary of the scheme as it currently operates, and more importantly our understanding of the government’s proposed changes to the scheme for businesses from 1st April 2023.
The cost of a unit of electricity and gas has been capped for businesses since October 2022 under the government scheme. The discount is calculated based on wholesale costs of energy versus a government-backed price.
This government-supported price has been:
The EBRS will be replaced by the new Energy Bills Discount Scheme (EBDS), which will mean that a price cap by the government will be replaced by a discount on market prices under the new scheme. The new scheme will be subjected to a maximum discount as well.
The discount is calculated as the difference between the wholesale price associated with an energy contract and the price threshold. The discount is phased in when the contract’s wholesale price exceeds the floor price, until the total discount per MWh reaches the maximum discount for that fuel.
Energy intensive industries (referred to as Energy and Trade Intensive Industries), which include mining, glassmaking, steel works and ceramics will be eligible for larger discounts (which requires a separate application). Full list of industries applicable to the larger discount can be found here.
The UK government announced details of the new scheme on 9 January and confirmed that bills will be discounted by:
Higher discount (only applicable for Energy and Trade Intensive Industries)
The updated scheme will come in with the new tax year, running from April 2023 until March 2024.
There are no changes to eligibility criteria. As before, the scheme is available to anyone on a non-domestic contract, including:
Your business should be:
If none of these apply to your business, you may not be eligible.
The discount will automatically be applied by your supplier for those businesses which fall under the standard discount.
For ETII’s those businesses will have to apply and the process for this is yet to be defined by government.
The level of support for each organisation will vary depending on type and date of contract. These are illustrative examples only, based on recent averages of forward wholesale prices. Prices may differ from those experienced in practice.
Example 1: A pub
A typical pub uses 16 MWh of gas and 4 MWh of electricity each month. Under the new scheme, it could receive up to £2,280 of taxpayer funded support in the 23/24 financial year.
Example 2: A small retail shop
A typical small retail store uses 2 MWh of gas and 1 MWh of electricity each month. Under the new scheme, it could receive up to £403 of taxpayer funded support in the 23/24 financial year.
Example 3: A medium sized manufacturing business
A medium sized manufacturer uses 1,600 MWh of gas and 200 MWh of electricity each month. Under the new ETII scheme, it could receive up to £687,120 of taxpayer funded support in the 23/24 financial year.
If you need any support to understand the changes to the current scheme, please do get in touch with your Alfa Energy consultant.