Yesterday the Government announced a new Energy Bills Discount Scheme (EBDS), for UK businesses, charities and the public sector from April 2023. It replaces the Energy Bill Relief Scheme (ERBS) which ends on 31 March 2023.
The new and less generous EBDS, is designed to provide a discount on energy bills for businesses and will give higher levels of support to those sectors that use particularly high levels of energy. The discounts will apply until 31 March 2024 but only to those whose wholesale prices are above a price threshold.
The maximum discounts available to all eligible non-domestic customers have been set at £6.97/ MWh for gas, with a price threshold of £107/MWh and £19.61/MWH for electricity, with a price threshold of £302/MWh. The discount is calculated as the difference between the wholesale price associated with the energy contract and the Government’s price threshold.
Businesses, predominantly those in manufacturing that fall into the higher energy use category will receive a higher gas and electricity bill discount based on a government supported price which will be capped by a maximum unit discount of £40.0/MWh for gas and £89.1/MWh for electricity.
The thresholds at which the discounts apply have increased significantly, for gas from £75/MWH under EBRS to £107/MWh under EBDS. For electricity, from £21/MWh EBRS to £302/MWh under EBDS. In both cases that is an approximate rise of over 42%. It is also worth remembering that the discounts only apply to the wholesale element of your energy supply bill, not to the network and operating costs.
The Government suggests the new EBDS will help those businesses locked into contracts signed before the recent substantial falls in the wholesale energy prices and provide reassurance against the risk of prices rising again. Recent data shows that wholesale gas prices have now fallen to the levels they were just prior to Putin’s invasion of Ukraine – almost halving since the current EBDS was introduced. That said, according to the BBC, wholesale gas prices are still three to four times higher than their long-term average.
The Chancellor, Jeremy Hunt, has expressed concern that the falling wholesale energy prices have not been passed on to businesses and has asked Ofgem for an update on whether further action is needed.
Wayne Thomas, Partner at Bates Weston comments:
“The Chancellor had signalled that the level of support given to businesses was too expensive to continue in its original form, so a reduction in the support given had been expected. The scale of the reduction, together with the apparent reluctance of the energy suppliers to pass on the reductions in wholesale gas prices, mean that many businesses are facing a significant uplift in energy costs from April 2023. We like many, including the Federation of Small Business, are disappointed with the new scheme and encourage businesses to plan for the inevitable uplift in costs in the Spring.”
Below is the Government’s summary of the scheme, and further information is available in a Government Factsheet.
Energy Bills Discount Scheme summary
For eligible non-domestic customers who have a contract with a licensed energy supplier, the government is announcing the following support:
- From 1 April 2023 to 31 March 2024, all eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill.
- This will be subject to a wholesale price threshold, set with reference to the support provided for domestic consumers, of £107/MWh for gas and £302/MWh for electricity. This means that businesses experiencing energy costs below this level will not receive support.
- Customers do not need to apply for their discount. As with the current scheme, suppliers will automatically apply reductions to the bills of all eligible non-domestic customers.
For eligible Energy and Trade Intensive Industries, the government is announcing:
- These businesses will receive a discount reflecting the difference between a price threshold and the relevant wholesale price.
- The price threshold for the scheme will be £99/MWh for gas and £185/MWh for electricity.
- This discount will only apply to 70% of energy volumes and will be subject to a ‘maximum discount’ of £40.0/MWh for gas and £89.1/MWh for electricity.
