Energy price cap announcement for businesses

The Government has announced its plan to cap wholesale energy prices for UK businesses of all sizes under the Energy Bill Relief Scheme.

An overview of the new Energy Bill Relief Scheme is as follows:

1. 1. 1. The scheme will offer discounts to firms for a period of 6 months, effective 1^st October 2022 – 31^st March 2023. The scheme will be reviewed in 3 months’ time, with the review designed to inform Government decisions on support following March 2023.
      2. It will apply to fixed contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts and will be automatically applied to energy bills, much like the Energy Price Guarantee for households.
      3. 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, less than half the wholesale prices anticipated this winter. It includes the removal of green levies paid by non-domestic customers who receive support under the scheme.

The level of price reduction for each business will vary depending on their contract type and circumstances:

1. 1. 1. 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.
      2. 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. The amount of this Maximum Discount is likely to be around £405/MWh for electricity and £115/MWh for gas.
      3. For businesses on flexible purchase contracts, 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.

Guidance can be found here: https://www.gov.uk/guidance/energy-bill-relief-scheme-help-for-businesses-and-other-non-domestic-customers

FWD has already written to the Treasury to ensure that the wholesale sector remains eligible after March 2023 and will continue to press this point. Any member with questions should contact: epgbusiness@beis.gov.uk.