Flexible Customer Update - The Energy Bill Relief Scheme
Introduction
On 21 September the Government announced further details of the Energy Bill Relief scheme. The scheme provides support for non-domestic customers from 1 October 2022 until 31 March 2023. There may be some exclusions to the scheme, for example businesses that use gas or electricity for the purpose of generating power they are selling back into the grid, such as power stations, pumped hydro or grid-level battery storage.
The Support
The Government supported price has been set based on wholesale energy costs. Customers will also have to pay non-commodity costs on top of this. The wholesale price support level is set at:
- £211/MWh (21.1p/kWh) for electricity
- £75/MWh (7.5p/kWh) for gas
Customers on variable, deemed rates, flexible contracts and any other non-fixed rate contracts would be subject to a ‘maximum discount’ to be set on 30 September 2022. This is based on expected winter prices of £600/MWh for electricity and £180/MWh for gas. Suppliers will be required to administer the scheme and will automatically apply discounts to the bills of all eligible customers. Customer will not need to apply to enter the scheme. The suppliers will be compensated by the Government. The discount will be applied on a p/kWh basis.
Flexible Contracts
- The price reduction will depend on the difference between your achieved weighted average (WA) baseload price and the Government supported price. The discount will be subject to the ‘maximum support’.
- The indicative ‘maximum support’ was confirmed on 1 October 2022 as £345/MWh (34.5p/kWh) for electricity and £91/MWh (9.1p/kWh) for gas. The indicative discounts published at the time of the announcements were £405/MWh (40.5p/kWh) for electricity and £115/MWh (11.5p/kWh) for gas, so the final published price shows a discount of 15% and 21% respectively on the indicative figures.
- If your achieved weighted average price is below the price support level, no discount would be offered. (Example: Achieved electricity WA price of 20.0p/kWh, no discount will be applied)
- If your weighted average price is above the price cap, but below the price support level + the maximum support the price would be discounted to the price support level. (Example: Achieved electricity WA price of 54.0p/kWh, the price will be discounted by 32.9p/kWh to 21.1p/kWh)
- If your weighted average price is about the price support level + the maximum support, the price will be discounted by the maximum support. (Example: Achieved electricity WA price of 58.0p/kWh, the price will be discounted by 34.5p/kWh to 23.5p/kWh)
Ongoing Support
- A review of the scheme will be published in 3 months and this will feed into decisions for continued support beyond March 2023. The review is focussing on identifying the most vulnerable business customers who may continue to receive support from April 2023.
- The Government is recommending to customers that they use this 6 month period to identify measures to protect themselves against the high wholesale price levels.
Please note that the information above is based on information published by the Government. Suppliers are still digesting how they will deliver this support through bills. Full details published by the Government is available here.
Disclaimer
The information published and opinions expressed in this document are provided by The Energy Intelligence Centre (EIC) for its clients only. The contents are intended for informational purposes only. EIC makes no representation (either express or implied) or other assurances (either express or implied) that the information and opinions expressed in this email are always accurate, complete or up-to-date.
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