What does the energy price cap mean for my business?

9th Nov 2022 | Online Energy | 4 minute read

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By now your business has probably heard that the government have announced support for business energy bills.

The new energy bill relief scheme began on the 1st of October. Despite this many businesses are still confused with government advice or not sure what to do with energy bills.  Support was also announced alongside the support for domestic energy consumers.

This support is available to all business customers that signed their energy contracts after the 1st of December 2021.

Whilst support is much needed a lot of business energy consumers have been left confused by what this means for their bills. This is because the support only caps the wholesale element of your energy bills. According to Ofgem, the wholesale cost element of a bill is just 29% of an electricity bill and 41% of a gas bill. For a better representation see the images below.


Fixed tariff customers

If your business is on a fixed rate tariff the wholesale element of your energy bill be capped at 21.1p/kWh for electricity and 7.5p/kWh for gas.


Deemed, default and variable tariff customers

If you are on a deemed, default or variable tariff then you will still receive support, however, this will be covered at a maximum discount.

The discount will be the difference between a deemed wholesale rate and a maximum discount of 34.5p/kWh for electricity and 9.1p/kWh for gas. This means that if the wholesale rate for electricity is 100p/kWh the best price you could get would be 65.5p/kWh.

As the discount only applies to wholesale unit rates and a fixed price contract is less than this your business is not going to benefit from staying on deemed rates.     

Flexible tariff customers

If your business is on a flexible tariff, then support will be calculated by suppliers according to your company’s usage. This will likely be subject to a maximum discount.


How can we support your business?

If you are not on a fixed rate contract or your contract is coming to an end, then don’t panic you can still be eligible for government support. Anyone who signs a new business energy contract up till the 31st of March will be eligible for support. 

If you are on a deemed or variable tariff you will be missing out on the same savings as those on fixed rate tariffs. This is because your prices, whilst they are discounted are still going to fluctuate depending on market developments. This leaves your business vulnerable to paying higher prices if wholesale prices go above the government’s maximum discount.

If you would like to compare prices today to see how much you could be saving, then request a quote here. If you would prefer to get in touch, then either leave your details here or speak to one of our online agents on our web chat below.


What does this mean for businesses?

Overall, the price cap is good news for your business as it gives some relief on the high energy bills you will have been suffering with. Your energy supplier will now only be able to charge you at government-capped prices for your energy bills.

If your business energy is paid through your landlord, then make sure you are still benefitting from the price cap and you are not getting overcharged.

This support, if used properly will help your business in the immediate future, in hopes to stop your business from having to close down or reduce operations.     

What is a price cap?

An energy price cap is a guaranteed price usually set by the energy regulator or government. This limits the amount you can be charged for the cost of your energy. This ensures that everyone can cope with paying their energy bills.

When will the price cap be in place till?

The business energy price cap will remain in place until 31st March 2023. The Chancellor, Jeremy Hunt has said once this support comes to an end there will be more tailored support towards the industries that need it the most. Hunt, also stated that this support will be more tailored towards energy efficiency. 


What will happen after the price cap?

Another reason for you to get a fixed-rate contract now is that wholesale gas prices are likely to go up even more next year.  If you wait until the price cap is over to fix your business energy rates you could end up paying a lot more than you need to.

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