The Energy Bill Relief Scheme for Businesses

Last updated on 1st December 2022

We understand that rising energy prices are daunting for small business owners all over the UK. In fact, a new report from Simply Business revealed that 54% of small businesses say that rising fuel and energy costs are their biggest challenge in 2022, and more than half want to see changes to the energy price cap.

With a new Energy Bill Relief Scheme recently being announced, we investigate what support there is for businesses, how much your bills will be reduced, and how you can save money.

What is the Energy Bill Relief Scheme?

Liz Truss has announced that from the 1st of October to 31st of March 2023, a new Energy Bill Relief Scheme will provide a discount on wholesale gas and electricity prices for businesses, voluntary sector organisations, and the public sector.

The scheme will run for six months, and your business will be eligible if it meets the following criteria:

• You are signing a new energy contract
• You are on a fixed contract that was signed on or after 1st April 2022
• You are on a deemed/ out of contract or variable tariff
• You are on a flexible purchase or equivalent contract

How much will your bills be reduced?

Wholesale costs are expected to be £600 per MWh for electricity and £180 per MWh for gas this winter. However, with the new Energy Bill Relief Scheme, the government-supported price has been set to:

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

The government-supported price is based on the implied wholesale element of the Energy Price Guarantee for domestic customers.

An example of the Energy Bill Relief Scheme

The government gives an example of an SMB who has recently entered a fixed contract in August 2022. They use 200 MWh of electricity and 1,600 MWh of gas each month, costing them £560,000 per month.

At the time they signed their contract, wholesale prices for the next 6 months were expected to be higher than the government-supported price of £211/MWh for electricity, and £75/MWh for gas, meaning they can receive support under this scheme.

The difference between expected wholesale prices when they signed their contract and the government-supported price is worth £360/MWh for electricity and £90/MWh for gas. This results in a discount of £215,000 per month, reducing their original bill by more than 35%.

How do you get the discount?

You don’t need to apply for the discount, it will be automatically applied to all your eligible bills.

How you receive the Energy Relief Scheme will depend on how you pay for your energy:

• If you’re already in a contract, you’ll get support if the calculated wholesale element of the price you are paying is above the government-supported price.
• If you’re about to sign a new fixed price contract, the price reduction will automatically be applied to your bill through your supplier.
• If you’re on a default or variable tariff, you will get the reduction, subject to the ‘maximum discount’ (confirmed on 20th September).

Energy bill support to last only until April 2023

On the 17th of October 2022, Jeremy Hunt, the UK's prime minister, announced the energy bill support, initially designed to last for 2-years was now set to be scaled back from April 2023.

However, in the Autumn Statement, Mr Hunt announced a new version of the Energy Price Guarantee (EPG). This new version will be in place until April 2024 and will cap energy bills at £3,000, £500 more than it is currently set at.

The increase in EPG may be accompanied by the removal of the £400 rebate households are receiving this year.

Keep up to date with the latest developments on the energy bill here.

What can my business do now to save money on energy bills?

It is easy to pay your energy bills and not think anything of it. Have you ever questioned why they cost that much? Can you save yourself some money? People are tightening their belts more than ever now, and there are plenty of ways you can assess your spending:

Get an energy audit - Knowing what is contributing to your energy bills is the first step to reducing costs. Many independent companies offer energy audits, and they should provide you with a report and suggest actions that can reduce your costs.

Purchase energy-efficient office equipment - Understanding your electrical appliances' energy ratings is an easy way to reduce costs. If you are looking to replace things, keep energy efficiency at the forefront of your purchases, as this will have a long-term positive impact on your business.

Invest in a programmable thermostat - Setting up your heating to come on and turn off at certain times will reduce the number of times it is on with no purpose, saving you money. Some smart devices even allow you to control your energy from any location.

Don’t leave things on standby - Turning switches off may seem like a hassle that is not worth worrying about, but The Energy Saving Trust found that the average UK home wastes £55 a year by leaving appliances on standby. For a business, that figure would probably be in the hundreds!

Introduce eco-friendly policies: Going green doesn't have to impact your profit margins. By starting small, you can make a big difference. Replace all your lightbulbs with LED lights; they'll save you money and last longer.

What if you can't pay your business energy bill?

If you don't feel like you can afford your energy bill, contact your supplier and discuss your circumstances with them. Most energy companies understand the current struggles people are facing and may be able to work on a payment plan with you. Ask if there is the option to go on payment breaks or reductions, have more time to pay, or access hardship funds.

Another option is to ask your local council whether they're doing any small business support funding or grants - use the GOV.UK business finance and support finder.

After doing this, if you still feel like you cannot find a suitable solution, it may be beneficial to contact Citizens Advice. Call 0808 223 1133 or use their online webchat.