The Builders Merchants Federation (BMF) has issued a swift ‘newsflash’ update to alert Members to the emerging detail regarding Government help with business energy costs.
The new Prime Minister spoke on 8 September about an ‘Energy Price Guarantee’ for households, but said little on policy help for companies and others — other than a new six-month scheme was “under development”. Today’s announcement (21 September) from Business Secretary Jacob Rees-Mogg MP has outlined more detail to the plan, with the BMF’s Policy & Public Affairs Manager Brett Amphlett summarising the package accordingly:
Through a new Government Energy Bill Relief Scheme, a discount on wholesale gas and electricity prices will be provided for all businesses, charities and the public services (such as schools & hospitals) whose current gas and electricity prices have been significantly inflated in the wake of global energy prices. This support for businesses “will be equivalent to that for households”.
This offer will apply to fixed contracts agreed on (or after) 1 April 2022, as well as to deemed, variable & flexible tariffs and contracts. It will apply to energy use between 1 October and 31 March 2023 for an initial six-month period for all business energy users.
The savings will be first seen in October bills, which are typically received in November. You do not need to take action or apply to the scheme to receive the support: the discount will automatically be applied to bills.
The Government has set a Supported Wholesale Price — expected to be £211 per MWh for electricity and £75 per MWh for gas, and less than half the wholesale prices anticipated this winter — which is a discounted price per unit of gas and electricity. It includes the removal of green levies paid by business customers who receive support under the scheme.
For BMF members in England, Wales and Scotland, the details are:
Business 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.
Business 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. Whitehall is working with suppliers to ensure all their customers are given the opportunity to switch to a fixed contract/tariff for the duration of this scheme if they wish.
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.
For BMF members in Northern Ireland, a parallel scheme based on the same criteria and offering comparable support will be established. In addition, for Off Grid Users, equivalent support will be given to those that use heating oil or alternatives to gas. Further details “will be announced shortly”.
Help for households
Today’s news follows the Energy Price Guarantee announcement for households in Great Britain — under which a typical household will pay on average £2,500 a year on their energy bill for the next two years from 1 October 2022. The Business Secretary has now also confirmed equivalent support for households in Northern Ireland with the Northern Ireland Energy Price Guarantee offering households the same level of gas and electricity bill support as the equivalent scheme in England, Wales & Scotland.
Next steps
Changes to existing laws are required and emergency legislation will be introduced to finalise the package. Parliament is currently not sitting due to the recess for the party political conferences — thereafter, this emergency legislation will be introduced sometime in October.
Furthermore, Ministers will conduct a review into the operation of this scheme in three months to inform decisions on future support after March 2023. The review will “identify the most vulnerable non-domestic customers and how the UK Government will assist them further them with energy costs”.
Today’s GOV.uk press release for businesses is here:
https://www.gov.uk/government/news/government-outlines-plans-to-help-cut-energy-bills-for-businesses
The BMF aims to keep Members up to date over the coming weeks as the situation evolves (noting the ‘fiscal event’ to be delivered by new Chancellor Kwasi Kwarteng on Friday). Visit its website for more information.
