Barely a week goes by without news coverage of the rising energy costs faced by consumers and businesses.
Last year the Government launched the Energy Bill Relief Scheme to provide discounts on wholesale gas and electricity prices, to help businesses and public sector organisations manage their costs. This was updated last month and relaunched as the Energy Bills Discount Scheme (EBDS) which will run from April 2023 to April 2024.
Announcing the scheme, the Department for Business, Energy & Industrial Strategy said: “The government has been clear that current levels of support were time-limited and intended as a bridge to allow businesses to adapt. Wholesale gas prices have now fallen to levels just before Putin’s invasion of Ukraine and have almost halved since the current scheme was announced. The EBDS therefore strikes a balance between supporting businesses over the next 12 months and limiting taxpayer’s exposure to volatile energy markets, with a cap set at £5.5 billion based on estimated volumes.”
Eligibility
The EBDS is available to all businesses 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 standard variable tariffs
- on flexible purchase or similar contracts
- on variable ‘Day Ahead Index’ (DAI) tariffs (Northern Ireland scheme only)
How is the discount calculated?
The discounts apply to gas and electricity unit prices and are subject to a maximum discount. The relative discount will be applied if wholesale prices are above a certain price threshold. For most non-domestic energy users in Great Britain and Northern Ireland these maximum discounts have been set at:
- 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
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.
Those in so-called Energy and Trade Intensive Industries or ETIIs will receive a higher level of support, applicable to 70% of energy volumes. The maximum discounts and price threshold for these sectors are:
- electricity – £89 per MWh with a price threshold of £185 per MWh
- gas – £40 per MWh with a price threshold of £99 per MWh
How is the discount administered?
Suppliers will automatically apply reductions to the bills although eligible ETII customers will have to apply for the higher level of support.
If you would like to review your business energy purchasing arrangements, please get in touch with a member of our expert team.
