Energy support for businesses scaled back under new scheme

Home » News » Energy support for businesses scaled back under new scheme

Fish and chip shops will continue to receive financial support towards their energy bills from April, however, at a much-reduced rate, after Chancellor Jeremy Hunt announced a new £5.5bn government scheme.

When the current Energy Bill Relief Scheme comes to a close at the end of March, it will be replaced by the Energy Bills Discount Scheme (EBDS), giving a reduction per unit of gas and electricity, rather than a fixed price.

The revised scheme will run for a further year, until March 2024, and is described by the government as striking “a balance between supporting businesses over the next 12 months and limiting taxpayer’s exposure to volatile energy markets, with a cap set at £5.5 billion based on estimated volumes”.

For the majority of businesses in Great Britain and Northern Ireland, the maximum discounts have been set at £6.97 per megawatt hour (MWh) for gas and £19.61 per MWh for electricity. There is a price threshold, however, which means businesses can only benefit from the scheme when energy costs reach £107 per MWh for gas and £302 per MWh for electricity.

Under the new scheme, the government says a typical pub using 16 MWh of gas and 4 MWh of electricity each month, could save up to £2,280 in the 23/24 financial year.

The current Energy Bill Relief Scheme, introduced in October, caps the cost of gas and electricity for all businesses until the end of March but has been criticised as being “unsustainably expensive”. It is estimated the scheme will cost £18.4bn when it expires.

Support has decreased due to wholesale energy prices falling sharply in the past few months. They are now at a lower level than they were before Russia’s invasion of Ukraine, however, they are still three to four times higher than their long-term average.

The reduced government support came as no surprise to many. Howard Weston, commercial energy broker for Midland Business Solutions, says: “It is in line with the domestic price cap, both are scaled-back versions of the original, which I think everyone was expecting. Hopefully, with current prices falling, for any newly arranged contracts, the smaller amount of energy bill relief will be countered by the reduced cost of the contract.

“It’s not ideal in any shape or form as businesses will still be seeing increases of up to 300%, which we all know will result in many businesses simply becoming unviable. Tough times are ahead but hopefully, we will see wholesome energy prices drop for a sustained period, which is the only long-term solution for both businesses and the government.”

Andrew Crook, president of the NFFF, welcomed the certainty that the year-long support offers, saying: “The government doesn’t have a lot of money and the scale of this issue has grown so big, there’s only so much they can do. But at least we have a longer view so we know what we are facing. It was absolutely ridiculous coming into January with no idea what was happening after March. How can you run a business like that?

“We still need a longer-term strategy for hospitality. You’ve got to give entrepreneurs and small businesses the headroom for growth or at least see there is room for growth on the other side of this.”

As with the original scheme, suppliers will automatically apply reductions to the bills of businesses on existing fixed price contracts that were agreed on or after 1st December 2021, those signing new fixed price contracts, on deemed/out of contract or standard variable tariffs, on flexible purchase or similar contracts, and on variable ‘Day Ahead Index’ (DAI) tariffs (Northern Ireland scheme only).

Leave a Comment

Your email address will not be published. Required fields are marked *

Shopping Basket