The Energy Bill Discount Scheme will start on the 1st of April, this promises to be a key factor in ensuring businesses can remain financially resilient in uncertain times - however, this is a major reduction in the current support businesses have. Compared to the Business Energy Bill Relief Scheme, the new initiative will provide much less support: the scheme's life will be extended from April 2021 to March 2024, but that whole time will operate with a reduced amount of funding.
How does the new EBDS scheme actually work?
The Energy Bill Discount Scheme (EBDS) promises to bring much-needed relief in energy bills to business customers. Those that Signed a fixed rate contract on or after December 1st 2021 and those on variable or deemed rate agreements will benefit from the scheme.
Any reductions from energy bills from April 1st 2023 onwards will be automatically applied by suppliers.
With new government regulations in place, only businesses that are paying above their threshold price for energy bills will be eligible for support. Unfortunately, this may mean a significant adjustment period as businesses become accustomed to the new support.
The thresholds and maximum level of discount are:
- For gas, the threshold is 10.7p/kWh, with a maximum discount of 0.697p/kWh.
- For electricity, the threshold is 30.2p/kWh, with a maximum discount of 1.961p/kWh.
For businesses that are paying less than the government's threshold rate for gas and electricity, there will be no reduction in their energy bills.
This presents a problem for businesses currently operating on a tight budget but it does provide an incentive for them to seek out better energy rates to be less affected by the lack of discounts from the government.
Depending on the rates you pay, you could save up to 1.961p/kWh on your electricity and 0.697p/kWh on your gas bill. The discount will however depend on how much you pay for your energy bills. See below for an example of what your rates could look like:
Why make any changes to the original support?
Liz Truss’s original strategy of introducing the EBRS was a positive move to lessen energy bills for non-domestic customers. However, due to the unsustainable level of support that companies were receiving from the government, Chancellor Jeremy Hunt took matters into his own hands and announced at a meeting with business leaders in January that this was far too expensive for any government to endure in the long term.
The unfortunate result is that the burden of high energy bills may not be as effectively alleviated as had originally been projected. Nevertheless, businesses will still receive some relief while still being able to stay afloat financially amidst challenging times.
In a bold new move to protect the taxpayers, Jeremy Hunt declared that the current level of support for businesses in the energy sector will be significantly reduced. This comes as a response to the unpredictable nature of the energy market and its potential to cause a financial risk on an already tight budget. This will protect taxpayers in the long run.
What are the differences between the two schemes?
The biggest difference between the two support packages for businesses is the cost to the government. The EBRS has been estimated to cost around £18 billion over its 6-month period while the newly implemented EBDS is estimated to cost a much lower amount of £5.5 billion over its year-long period.
This stark contrast in pricing could be attributed to EBDS relying less on traditional forms of financial aid and instead encouraging companies to change their strategy, helping them become more resilient in the process.
The energy crisis has been a major issue in recent years that has caused many businesses to struggle financially. To ease the pressures, the government has introduced a special scheme for industries classified as Energy and Trade Intensive Industries (ETII). Customers who are eligible for this scheme, they will have to make an application for extra support which will be applied to their energy bills. This provides an extra source of financial help for these businesses that rely heavily on energy and trade. Ultimately, this will provide greater economic stability within the industry and aid their survival during this difficult energy period.
For ETII customers the threshold and maximum discounts are set out below:
- For gas, the threshold is 9.9p/kWh and the maximum discount is set at 4.0p/kWh
- For electricity, the threshold is 18.5p/kWh and the maximum discount is set at 8.9p/KWh
See more, about whether your business is qualified for this support here.
How can Online Energy support your business?
This winter's mild temperatures brought some relief to energy prices in the wholesale market, providing a brief reprieve to industries that rely heavily on energy. However, the reduced costs are unlikely to be reflected in consumer prices promptly. In fact, with an increase in demand for gas in the global market, these lower prices could quickly disappear again as soon as later this year. Ultimately, consumers need to balance their reliance on retail or wholesale energy sources and take into consideration the current trends before making a purchase decision.
It is more important now than ever that businesses are ensuring that energy prices are stable. This is largely done by taking care to renew or sign contracts with energy suppliers at the right time. To ensure that this is successful, it is essential to compare pricing from different suppliers at regular intervals. Doing so will help identify when the prices are most stable and ensure that your business can capitalize accordingly. It may seem like a lot of effort upfront but having an organized system in place could save hundreds or even thousands in the long run.
We understand that businesses currently have limited time, and are often too busy running around to check different suppliers for the most economical prices. That's why using a comparison tool like ours is a great way to get the job done quickly and effectively. Our specially designed tools save customers time and money by comparing prices from multiple suppliers with just a few clicks of the mouse, offering the best options for your needs all at once.