Following campaigning from industry colleagues across the country, the government has today announced plans to introduce a cap on wholesale energy bills for all non-domestic energy customers, for an initial six months from 1 October.
Under the scheme, revealed by the Department for Business, Energy and Industry, wholesale prices are expected to be fixed for all non-domestic energy customers at £211 per MWh for electricity and £75 per MWh for gas for six months.
- It will apply to energy usage from 1 October 2022 to 31 March 2023.
- It will apply to fixed contracts agreed on or after 1 April and variable and flexible tariffs and contracts.
- The savings will be first seen in October bills, which are typically received in November.
- The discount will automatically be applied to firms (in the form of a p/kWh discount), there will not be a requirement to contact your supplier.
The government said the "supported wholesale price" would be "less than half the wholesale prices anticipated this winter". 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.
A review will be published in 3 months in order “to inform decisions on future support after March 2023” which will “focus in particular on identifying the most vulnerable non-domestic customers and how the Government will continue assisting them with energy costs.”
Together with BID partners across the UK, Orpington 1st BID will make the case for further business support on VAT and Business Rates. Executive Director Chris Travers, said, "today's announcement is welcome and will come as some relief to businesses. However, we hope that further support will be announced in due course, on Business Rates and VAT, giving businesses the chance to help achieve the growth which the Government is targeting."
Government has said that 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. The amount of this Maximum Discount is likely to be around £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments. Non-domestic customers on default or variable tariffs will therefore pay reduced bills, but these will still change over time and may still be subject to price increases. This is why 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, 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.
A demonstrative example:
A restaurant uses 4 MWh of electricity and 16 MWh of gas a month. They signed a fixed contract in August 2022, giving them a current monthly energy bill of about £7,000. At the time they signed their contact, wholesale prices for the next 6 months were expected to be higher than the Government Supported Price of £211/MWh for electricity, and £75/MWh for gas, meaning they can receive support under this scheme.
The difference between expected wholesale prices when they signed their contract and the Government Supported Price is worth £380/MWh for electricity and £100/MWh for gas, meaning they receive a discount of £3,100 per month, reducing their bill by over 40%.