Let's Understand The UK Governments Energy Bills Discount Scheme - How Will It Affect Your Business?

Introducing the new Energy Bills Discount Scheme (EBDS)

From April 1st, the Energy Bill Relief Scheme will be scrapped and replaced with a new scheme set out by the UK government, the ‘Energy Bills Discount Scheme’. This is designed to help businesses around the UK & Northern Ireland cope with the rise in energy prices.

Although this is not a business energy price cap, this scheme will offer discounted unit rates on fixed-priced contracts signed on or after 1st December 2021. This will also include out-of-contract rates, this is subject to a minimum threshold.

The new scheme Energy Bills Discount Scheme or EBDS for short, will begin on the 1st of April 2023 and will last until 31 March 2024 and will automatically apply a unit discount of up to £19.61/MWh for electricity for all eligible non-domestic users.

But, who is actually eligible?

The eligibility for this scheme is actually the same as the last, the UK Government again is making the scheme available to everyone on a non-domestic contract including: 

• Businesses

• Voluntary sector organisations, such as charities

• Public sector organisations such as schools, hospitals and care homes

Who are:

• On existing fixed price contracts that were agreed on or after 1 December 2021

• Signing new fixed-price contracts

• Out of contract or standard variable tariffs

• On flexible purchase or similar contracts

• On variable ‘Day Ahead Index’ DAI tariffs (Northern Ireland scheme only)

Why is there a funding cut with the new scheme?

There is a massive difference between the two schemes of funding from the UK Government. From the 1st of October 2022 to the 31st of March 2023, the old scheme EBRS - (Energy Bill Relief Scheme) received a significant £18 billion over that short period of 6 months. Fast-forwarding now to the 1st of April 2023, the estimated funding for the new scheme EBDS (Energy Bills Discount Scheme) has been cut and capped at only an estimated £5.5* billion over the next 12 months from the 1st of April 2023 to the 31st of March 2024.

So why the change in funding?

In a nutshell, the latter scheme EBRS - (Energy Bill Relief Scheme) was introduced during Liz Truss's term in No. 10. After Prime Minster Liz Truss left office, the newly appointed chancellor Jeremy Hunt delivered his first Autumn Statement in November 2022, where he confirmed the plans to change this scheme. For reasons, he stated that Liz Truss's scheme gave this scheme a 'blanket' approach. He found that the current approach was 'unsustainably expensive' for the Government.

It's safe to say, non-domestic users of energy in the UK can be looking at less help over the next 12 months.

How does the EBDS discount work?

For businesses to be eligible for the discount offered by the government, their current unit rates must be higher than the minimum threshold, which is 30.2p per kWh. The government will offer a maximum of about 2.0p per kWh off the current wholesale unit rate you pay to your business's electricity supplier. If you're currently paying less than 30.2p per kWh for your electricity supply, you, unfortunately, will not be eligible for the new scheme's discount.

Here's a brief look at how this works in MWh:

• Business customers will automatically receive a discount of £19.61 a MWh for electricity.

• However, smaller businesses with energy costs below £302 a MWh for electricity will not receive support.

Coming from The Guardian, James Cartlidge the Exchequer Secretary to the HM Treasury of the United Kingdom, says the new discount scheme will be the equivalent of a pub saving £2,300 or £400 for a typical small business. (This is including both types of energy, gas & electricity).

Will the discount be automatically applied?

Yes! Thankfully all the faff has been taken out of having to apply for this scheme's discount, giving business owners some peace of mind. But, it is worth keeping in mind that if your business is one of the listed Energy Trade Intensive Industries, then you will have to apply for that discount. Here is the government's list of business sectors eligible for the ETII scheme.

Conclusion

After the invasion of Ukraine by Putin, energy prices have taken a drastic sharp incline, leaving small businesses affected massively by the change in the price of energy, especially in the wholesale price of electricity. Through UK Government's help, businesses can see some help being pushed their way in terms of discounts helping them to cope with the unforgiving rise in wholesale prices.

Although the change in government schemes from office to office is a big slap in the face for small businesses, as funding differences in these schemes have taken a massive decline. Should we still be happy with the help the government is setting out? We'll leave that to your opinion on the matter.

Although, business owners in the UK are still encouraged to find alternative ways to save on their energy bills. It will still come at a cost to them directly when investing in energy-saving techniques such as solar panelling, energy storage or voltage optimisation to name a few. This is where our experts at Smartech Elec can help you directly with voltage optimisation technology which helps reduce electricity consumption and in return reduce your businesses' electricity bill prices by up to nearly 20%* - follow the link to learn more about what this technology can do for your business.

* - Installing voltage optimisation can save you up to 20%* on your electricity bill price but this is dependent on the appliances used within the business's property. For a fully comprehensive assessment of your business and full estimates on what you could potentially save reach out to our experts directly at 0800 099 6171 or email us at info@smartechelec.co.uk