Energy Price Support Announcement
The UK Government has announced outlined plans to help cut energy bills for non-domestic energy customers “including all UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals”. It will apply to fixed contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts. It will apply to energy usage from 1 October 2022 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.
As with the Energy Price Guarantee for households, customers would 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. To administer support, the Government has set a Supported Wholesale Price – expected to be £211 per MWh for electricity and £75 per MWh for gas which is a price per unit of gas and electricity. This is equivalent to the wholesale element of the Energy Price Guarantee for households. It includes the removal of green levies paid by non-domestic customers who receive support under the scheme. Other non-energy costs will remain.
The level of price reduction for each business will vary depending on their contract type and circumstances. 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 Maximum Discount. (The Maximum Discount is likely to be around £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments).
There remains a lack of detail on both eligibility and implementation, due to the complexity and variety of business energy contracts. There are more questions than answers and TEC is liaising with suppliers to get a clear picture for members on their individual position as soon as is practicably possible. It is likely that the majority of TEC members are not affected by the cap, as their achieved price is lower. However, we can say that even at or below the capped price, energy will still be materially more expensive than organisations have been used to paying, and so the message to reduce consumption wherever possible remains.