UK Government plans to cut energy bills for businesses

Secretary of State for Business, Energy and Industrial Strategy, Jacob Rees-Mogg MP, has introduced a new scheme that will see energy prices for non-domestic customers in Great Britain and Northern Ireland cut, which is equivalent and in addition to the Energy Price Guarantee for households.

Motehr and daughter looking in branch window

Rees-Mogg stated the unprecedented rise in energy prices, following the war in Ukraine, has affected consumers and businesses of all sizes. The measures to boost the amount of domestic energy we produce to improve both energy security and supply, will increase growth, protect jobs and support families with their cost of living this winter.

Six-months of help

The scheme will apply to fixed contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts. It will apply to energy usage from 1 October 2022 to 31 March 2023, running for an initial six-month period for all non-domestic energy users. The savings will automatically be applied to bills first seen in October.

Customers entering new fixed price contracts after 1 October will receive support on the same basis.

Emergency legislation will be introduced when Parliament is back from recess in October. This will include legislation so that landlords pass the EBSS discount onto tenants who pay all-inclusive bills. The precise timeline is still to be confirmed. 

All of our members with high street branches will be paying more for their energy bills even with the support that has been unveiled today. Without intervention, one agency says their bill would have increased four-fold.

The discount of around 40 per cent is welcome and provides some certainty in the short-term. But the energy market is predicted to remain volatile, and we are concerned about what happens once the initial six-month price cap period expires.

The UK Government is about to announce its plan for growth – that needs to include is a longer-term energy support plan so businesses can look ahead with more confidence.

Timothy Douglas
Timothy Douglas Head of Policy and Campaigns | Propertymark

Energy prices

To administer support, the UK Government has set a Supported Wholesale Price – expected to be £211 per MWh for electricity and £75 per MWh for gas, less than half the wholesale prices anticipated. It includes the removal of green levies paid by non-domestic customers who receive support under the scheme.

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. 

Non-domestic 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. The UK Government is working with suppliers to ensure all their customers in England, Scotland and Wales are given the opportunity to switch to a fixed contract/tariff for the duration of the scheme if they wish, underpinned by the Government’s Energy Bill Relief Scheme support.

Scheme review

A review of the scheme's operation will be published in three months to inform decisions on future support after March 2023. It will focus on identifying the most vulnerable non-domestic customers and how the UK Government will continue assisting them with energy costs.

Not connected or eligible

If you are not connected to the gas or electricity grid, equivalent support will also be provided for non-domestic consumers who use heating oil or alternative fuels instead of gas. Further details will be announced shortly.

An additional payment of £100 to households across the UK who are not able to receive support through the Energy Price Guarantee. This might be because they live in an area of the UK that is not served by the gas grid and is to compensate for the rising costs of alternative fuels such as heating oil.

Northern Ireland support

Support for households in Northern Ireland has also been confirmed with the Northern Ireland Energy Price Guarantee which will offer households the same level of gas and electricity bill support as the equivalent scheme in Great Britain.

Households in Northern Ireland will also receive a £400 discount on bills through the Northern Ireland Energy Bills Support Scheme (NI EBSS). Energy suppliers will reduce bills by a unit price reduction of up to 17p/kWh for electricity and 4.2p/kWh for gas, which will take effect from November. The UK Government will backdate support for October bills through bills from November.