Energy costs help for agencies and businesses revealed by government

Agencies and other businesses are to receive help facing soaring energy costs in measures outlined this morning by the government.

Through a new Government Energy Bill Relief Scheme, the government will provide a discount on wholesale gas and electricity prices for all non-domestic customers - including all UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals - whose current gas and electricity prices have been significantly inflated in light of global energy prices.

The scheme will run for six months with a review mid-way through.

This support will be equivalent to the Energy Price Guarantee put in place for households and revealed some two weeks ago shortly before the Queen's death.It will apply to fixed contracts agreed on or after April 1 this year as well as to deemed, variable and flexible tariffs and contracts.

It will apply to energy usage from October 1 this year to 31 March 2023, running for an initial six-month period for all non-domestic energy users. The savings will be first seen in October bills, which are typically received in November.

The government says agencies and businesses will not need to take action or apply to the scheme to access the support. Support (in the form of a p/kWh discount) will automatically be applied to bills.

The level of price reduction for each business will vary depending on contract type and circumstances:

- Agencies and other businesses on existing fixed price contracts will be eligible for support as long as the contract was agreed on or after April 1 2022. Provided that the wholesale element of the price the customer is paying is above the Government Supported Price, their per unit energy costs will automatically be reduced by the relevant p/kWh for the duration of the Scheme. Customers entering new fixed price contracts after October 1 will receive support on the same basis;

- Those on default, deemed or variable tariffs will receive a per-unit discount on energy costs, up to a maximum of the difference between the Supported Price and the average expected wholesale price over the period of the Scheme. The amount of this Maximum Discount is likely to be around £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments. Agencies and other businesses on default or variable tariffs will therefore pay reduced bills, but these will still change over time and may still be subject to price increases;

- For businesses on flexible purchase contracts, typically some of the largest energy-using businesses, the level of reduction offered will be calculated by suppliers according to the specifics of that company’s contract and will also be subject to the mazimum discount announced by government.

The government will publish a review into the operation of the scheme in three months to inform decisions on future support after March 2023. The review will focus in particular on identifying the most vulnerable non-domestic customers and how the government will continue assisting them with energy costs. 

The Prime Minister and key government ministers have already spoken out about the package for businesses.

PM Liz Truss says: “I understand the huge pressure businesses, charities and public sector organisations are facing with their energy bills, which is why we are taking immediate action to support them over the winter and protect jobs and livelihoods. As we are doing for consumers, our new scheme will keep their energy bills down from October, providing certainty and peace of mind. At the same time, we are boosting Britain’s homegrown energy supply so we fix the root cause of the issues we are facing and ensure greater energy security for us all.”

The Chancellor Kwasi Kwarteng adds: “We have stepped in to stop businesses collapsing, protect jobs, and limit inflation. And with our plans to boost home-grown energy supply, we will bring security to the sector, growth to the economy and secure a better deal for consumers.”

And Business Secretary Jacon Rees-Mogg comments: “We have seen an unprecedented rise in energy prices following Putin’s illegal war in Ukraine, which has affected consumers up and down the country and businesses of all sizes. The help we are already putting in place will save families money off their bills, and the Government’s plans for businesses, charities and public sector organisations will give them the equivalent level of support. This, alongside the measures we are taking to boost the amount of domestic energy we produce to improve both energy security and supply, will increase growth, protect jobs and support families with their cost of living this winter.”