The government has unveiled more details of its support for businesses and public sector organisations facing rising energy bills.
Businesses, charities and public sector organisations are to be protected from rising energy costs for at least six months, according to the UK government. Business secretary Jacob Rees-Mogg announced on Wednesday that the government will work with suppliers to reduce wholesale energy costs.
Through a new Energy Bill Relief Scheme, the government will provide a discount on wholesale gas and electricity prices for all non-domestic customers (including all UK businesses, charities and public sector organisations such as schools and hospitals) whose current gas and electricity prices have been significantly inflated in light of global energy prices.
This support will be equivalent to the Energy Price Guarantee put in place for households. 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 do not need to apply to the scheme to access the support. Support (in the form of a p/kWh discount) will automatically be applied to bills. The level of price reduction for each business will vary, depending on their contract type and circumstances:
- Non-domestic customers on existing fixed price contracts will be eligible for support as long as the contract was agreed on or after 1 April 2022. Provided that the wholesale element of the price the customer is paying is above the government Supported Price, their per unit energy costs will automatically be reduced by the relevant p/kWh for the duration of the scheme. Customers entering new fixed price contracts after 1 October will receive support on the same basis;
- Those on default, deemed or variable tariffs will receive a per-unit discount on energy costs, up to a maximum of the difference between the Supported Price and the average expected wholesale price over the period of the scheme;
- Non-domestic customers on default or variable tariffs will pay reduced bills, but these will still change over time and may be subject to price increases. The government is working with suppliers to ensure all their customers in England, Scotland and Wales are given the opportunity to switch to a fixed contract/tariff for the duration of the scheme if they wish, underpinned by the government's Energy Bill Relief Scheme support for businesses on flexible purchase contracts.
A parallel scheme, based on the same criteria and offering comparable support will be established in Northern Ireland. Equivalent support will also be provided for non-domestic consumers who use heating oil or alternative fuels instead of gas.
The government will publish a review of the scheme in three months to inform decisions on support after March 2023. The review will focus on identifying the most vulnerable non-domestic customers and how the government will continue assisting them with energy costs.
Kate Nicholls, ceo of UKHospitality, said: "This intervention is unprecedented and it is extremely welcome that government has listened to hospitality businesses facing an uncertain winter. We particularly welcome its inclusiveness - from the smallest companies to the largest - all of which combine to provide a huge number of jobs, which are now much more secure."
Tina McKenzie, policy and advocacy chair of the Federation of Small Businesses (FSB), said: "This is a substantial move and will likely be of considerable help to small firms which have been crying out for months for measures to limit the pain caused by spiralling energy prices … but a tough year remains ahead for many small firms … The next stage will be for small businesses to learn what the changes mean for their current contracts and for any offers they have been looking at, but waiting to decide what to do."
Written by Rachel Miller.