Cost of living: government help to reduce commercial energy bills
The government has announced two schemes that may help reduce your business’s energy bills for the period 1 October 2022 to 31 March 2024.
Most businesses with a non-domestic contract for their gas and electricity supply are eligible for support. Your business will not be eligible if:
- you agreed a fixed-tariff contract before 1 December 2021; or
- your business uses gas or electricity for the purpose of generating power that it sells back into the grid.
How the schemes work
The schemes involve a discount automatically being applied to the commercial energy bills of eligible businesses.
If your business is eligible, you should have started to see a discount applied to bills from November 2022.
Energy Bill Relief Scheme
This scheme provides a discount to the energy bills of eligible businesses for the period 1 October 2022 to 31 March 2023.
The discount is calculated by comparing the wholesale price your supplier pays for the energy you use against a ‘Supported Wholesale Price’ set by the government. The Supported Wholesale Price is set at 21.1p per kWh for electricity and 7.5p per kWh for gas.
The amount of discount that will be applied to your bill will depend on the type of contract your business has.
Your business is only eligible for a discount if the contract was signed on or after 1 December 2021.
If the wholesale price your supplier pays for the energy you use is greater than the Supported Wholesale Price, your bill will be discounted by the difference between these prices.
For example, if your supplier pays 30p per kWh for electricity, your electricity bill will be discounted by 8.9p per kWh (this is calculated by taking the Supported Wholesale Price of 21.1p per kWh away from the 30p per kWh your supplier pays).
Variable, deemed or default tariff
If you do not have a fixed-tariff contract, the ‘Maximum Discount’ you can have is 34.5p per kWh for electricity and 9.1p per kWh for gas. A discount will only be applied if the wholesale price your supplier pays for the energy you use is greater than the Supported Wholesale Price.
For example, if your supplier pays 20p per kWh for gas, you will be eligible for a discount as this is 12.5p per kWh higher than the Supported Wholesale Price set by the government. However, as this is higher than the Maximum Discount for gas, your discount will be the maximum 9.1p per kWh for gas.
For more information on the Energy Bill Relief Scheme, including examples of how discounts are applied, see GOV.UK.
Energy Bills Discount Scheme
This scheme will provide eligible business with a reduced level of support during the period 1 April 2023 to 31 March 2024.
If your business is eligible for support, an automatic discount will be applied to your bills if the wholesale price paid by your supplier exceeds:
- 30.2p per kWh for electricity; and
- 10.7p per kWh for gas.
The maximum discount that will be applied will be 1.961p per kWh for electricity and 0.697p per kWh for gas.
For example, if your supplier pays 34p per kWh for electricity, you will be eligible for a discount as this is higher than the threshold of 30.2p per kWh. As the difference between the two figures is higher than the maximum discount available, your discount will be the maximum 1.961p per kWh for electricity.
Discounts will be automatically applied by your supplier.
Businesses in sectors with high energy usage
A higher level of support may be available if your business is in a sector with a higher level of energy use. To see if your business may be eligible, check GOV.UK to see if it operates in a sector listed in the Energy and Trade Intensive Industries.
If your business is eligible for a higher level of support, it will have a lower threshold before a discount is applied and the maximum discount will be greater. The discount will apply to 70% of energy used by your business.
- For electricity, discounts will be a maximum of 8.9p per kWh when the wholesale price your supplier pays exceeds 18.5p per kWh.
- For gas, discounts will be for a maximum of 4p per kWh when the price your supplier pays exceeds 9.9p per kWh.
You will have to apply for this higher level of support. Further information on the application process has not yet been published. We will update this page when more information is available.
For more information on the Energy Bills Discount Scheme, see GOV.UK.
If you pay energy costs to a landlord
If your landlord has a commercial energy contract with a supplier, it is your landlord that will receive the benefit from the Energy Bill Relief Scheme. However, if your landlord passes energy costs on to you, they must consider passing on a ‘just and reasonable’ amount of the scheme benefit to you as well. Your landlord must notify you of their decision on how much they will pass on, even if they decide it is not appropriate to pass on any of the benefit.
Contact us for advice if you feel your landlord is not passing on the right amount of benefit from the scheme. You can also find more information on landlords’ obligations on GOV.UK.
Currently, the obligations for landlords to pass on scheme benefits applies to the Energy Bill Relief Scheme. However, the government has confirmed an intention for similar measures to be put into place for benefits received under the Energy Bills Discount Scheme.