Government confirms new non-domestic “Energy Bills Discount Scheme”

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A new energy scheme for businesses, charities and the public sector was confirmed by the HM Treasury on 9th January, ahead of the current support ending in March.

The new Energy Bill Discount Scheme will mean all eligible UK businesses and other non-domestic energy users will receive a discount on high energy bills until 31 March 2024.

This is set to help businesses locked into contracts signed before recent substantial falls in the wholesale price manage their costs and provide others with reassurance against the risk of prices rising again.

For eligible non-domestic customers who have a contract with a licensed energy supplier, the government has announced the following support:

  • From 1 April 2023 to 31 March 2024, all eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill.
  • This will be subject to a wholesale price threshold, set with reference to the support provided for domestic consumers, of £107/MWh for gas and £302/MWh for electricity. This means that businesses experiencing energy costs below this level will not receive support.
  • Customers do not need to apply for their discount. As with the current scheme, suppliers will automatically apply reductions to the bills of all eligible non-domestic customers.

A higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive – predominately manufacturing industries. These firms are often less able to pass through cost to their customers due to international competition.

For eligible Energy and Trade Intensive Industries, the government has announced:

  • These businesses will receive a discount reflecting the difference between a price threshold and the relevant wholesale price.
  • The price threshold for the scheme will be £99/MWh for gas and £185/MWh for electricity.
  • This discount will only apply to 70% of energy volumes and will be subject to a ‘maximum discount’ of £40.0/MWh for gas and £89.1/MWh for electricity.

The announcement was welcomed by the Energy Intensive Users Group (EIUG), although the group, which represents the UK’s Energy Intensive Industries (EIIs), notes that the level of relief still puts the UK at a competitive disadvantage compared to other countries. EIUG members include manufacturers of steel, chemicals, fertilisers, paper, glass, cement, lime, ceramics, and industrial gases.

In a statement following the scheme announcement, the EIUG was grateful that the government recognises some non-domestic energy users in Great Britain and Northern Ireland are particularly vulnerable to high energy prices due to their energy intensity and trade exposure and that these sectors will receive a higher level of support.

The discounts in the new scheme will reduce ETIIs’ exposure to escalating energy prices up to a point, thereby helping them to continue to compete internationally. However, the gas price threshold for the discount to kick in under the new scheme is lower than the threshold in the Energy Bill Relief Scheme.

Moreover, the EIUG outlined, Germany, France and Italy have recently extended and increased support for their ETIIs in context of Russia’s war against Ukraine. For example, the German government guarantees a net gas price of €70/MWh and a net electricity price of €130/MWh for 70% of EIIs’ current gas and electricity consumption relative to 2021. The German scheme also does not include maximum discounts.

In addition, energy prices in the US remain far below European prices.

In the Energy Security Strategy published last year, the Government recognised that UK industrial electricity prices are higher than those of other countries and promised to act to address this. The EIUG calls on Government to deliver on its commitment.

 

 

More information about the new scheme is available on the UK Government website.