Energy Bill Relief Scheme to become the Energy Bills Discount Scheme – What are the proposed changes from end of March 23 onwards?

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.

What is the Energy Bill Relief Scheme (EBRS)?

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:

• £211 per megawatt hour (MWh) for electricity
• £75 per MWh for gas

What will change from the end of March 2023 onwards?

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.

How much will the discount be?

The UK government announced details of the new scheme on 9 January and confirmed that bills will be discounted by:

Standard discount

• Electricity – £19.61 per megawatt hour (MWh) with a price threshold of   £302 per MWh.
• Gas – £6.97 per MWh with a price threshold of £107 per MWh

Higher discount (only applicable for Energy and Trade Intensive Industries)

• Electricity – £89 per MWh with a price threshold of £185 per MWh
• Gas – £40 per MWh with a price threshold of £99 per MWh

The updated scheme will come in with the new tax year, running from April 2023 until March 2024.

What are the eligibility criteria of the scheme?

 There are no changes to eligibility criteria. As before, the scheme is available to anyone on a non-domestic contract, including:

• businesses
• voluntary sector organisations like charities
• public sector organisations like schools, hospitals, and care homes

Your business should be:

• on a fixed price contract, agreed on or after 1 December 2021
• signing a new fixed price contract
• on deemed/out of contract or variable tariffs
• on flexible purchase or similar contracts

If none of these apply to your business, you may not be eligible.

How will the discount be applied?

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.

Examples (provided by the UK 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.

Source: Energy Bills Discount Scheme – GOV.UK (www.gov.uk)

If you need any support to understand the changes to the current scheme, please do get in touch with your Alfa Energy consultant.

Alfa Energy Group

Alfa Energy Group, an Edison Energy company, is an international energy, sustainability and technology consultant partner with 250 employees over 3 international locations. For over 25 years, Alfa has been servicing its clients’ needs through energy and water management, sustainability, and compliance consulting, and an intuitive ecosystem of user-driven energy, water, and carbon management software platforms. With coveted awards, an international industry-wide recognition, and clever simple solutions, today Alfa is partnering with clients to establish and deliver pivotal net zero strategies. Through smart energy management, the expertise and diligence of its people, transparent processes, and data management, Alfa continues to lead through its recognised gold standard of service delivery.

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