Energy Bills Discount Scheme: What businesses need to know
With volatile energy prices experienced in the last year and the energy markets looking uncertain for the foreseeable future, we welcome the government’s announcement that they will continue to provide support for businesses with their energy bills following the conclusion of the Energy Bills Relief Scheme (EBRS).
When the EBRS, which provided a discount on wholesale gas and electricity prices for all eligible non-domestic customers from 1 October 2022 to 31 March 2023, was first announced, the government made it clear that the level of support would be for a limited time, serving as a bridge to allow businesses to adapt.
Fortunately, following a review, the government has announced a new Energy Bills Discount Scheme (EBDS), which is set to run from 1 April 2023 to 31 March 2024 for eligible non-domestic consumers.
What is the EBDS?
The EBDS has been designed to offer companies relief on high energy costs by providing more budget predictability and price stability. The scheme will assist businesses that have entered into fixed price contracts during a period of high energy prices to manage their costs while providing other businesses reassurance against the possibility of prices increasing again.
The scheme therefore strikes a balance between supporting businesses over the next 12 months and limiting taxpayer’s exposure to volatile energy markets, with a scheme cap set at £5.5 billion based on estimated volumes.
According to government, the EBDS is made up of three parts:
- Baseline discount: This will automatically provide some support with energy bills for eligible non-domestic customers.
- The Energy and Trade Intensive Industries (ETII) discount: This will provide a higher level of support to businesses and organisations in eligible sectors and businesses must register to receive this support.
- The Heat Network discount: This will provide a higher level of support to heat networks with domestic end consumers. Heat networks must register to get this support.
Who qualifies for the scheme?
The scheme is aimed at those on a non-domestic contract, which essentially includes businesses, charities, and public sector organisations such as schools and hospitals. To qualify, these businesses must be:
- On a fixed price contract agreed after 1st December 2021
- Signing a new fixed price contract
- On a deemed contract, or out of contract
- On a standard variable tariff
- On a flexible purchase or similar contract
How does the EBDS work?
The EBDS will run for 12 months and apply for consumption between 1 April 2023 and 31 March 2024. Eligible businesses will receive a £/MWh discount on their energy bills. Businesses will only be provided a discount when the wholesale prices go over a certain price threshold and there will be a limit to the level of discount a business can receive. These limits, set by government, are as follows:
- Electricity: a maximum discount of £19.61/MWh, with discounts being applied when the wholesale price goes above £302/MWh.
- Gas: a maximum discount of £6.97/MWh, with discounts being applied when the wholesale price goes above £107/MWh.
The amount of discount businesses receive will be calculated by taking the difference between the relevant wholesale price and the price threshold.
What should businesses do next?
Businesses eligible for the baseline discount do not need to take any action as the relevant price reduction will automatically be applied to bills.
We encourage businesses that may need to register for the ETII discount to confirm whether they are eligible and to get the necessary registration documentation in order – they must provide an eligibility certificate to their supplier and should also be able to prove that at least 50% of their revenue is being generated from activity within one of the eligible Standard Industry Classification code sectors. These businesses will have 90 days from the scheme introduction date of 26 April to apply for the higher support.
You can read more about EBDS and the eligibility criteria here: https://www.gov.uk/guidance/energy-bills-discount-scheme/