Energy Bill Discount Scheme

The government recently announced a new energy support scheme for business customers, replacing the current one, which expires on March 31, 2023. We spoke to Joshua Greaves, Managing Director at Acorn Energy, to understand what this means for businesses.

A new energy scheme for businesses, charities, and the public sector was confirmed (January 9) ahead of the current plan ending in March 2023. The new scheme will be referred to as the Energy Bill Discount Scheme (EBDS) and will continue until March 31 2024.

What is the Energy Bill Discount Scheme, and what does it mean?

The Energy Bill Discount Scheme will mean all eligible UK businesses and non-domestic energy users will receive a discount on high energy bills until March 31 2024.

The scheme dramatically scales back discounts for business customers and will only support businesses who sign gas or electricity contracts when wholesale prices are significantly higher than they are today.

For businesses locked into contracts signed before recent substantial falls in the wholesale price, they will be able to manage their costs, and the new scheme will reassure others against the risk of prices rising again.

How will I be charged when the Energy Bill Discount Scheme starts?

To get a discount, the wholesale price on the day of signing the contract must be above 30.2p/kWh for electricity and 10.7p/kWh for gas.

For reference, the wholesale price published last week (week commencing January 23, 2023) was 17.25p/kWh for electricity and 5.71p/kWh for gas. Therefore, to qualify, they effectively must double.

Even if the wholesale market exceeds the new higher benchmark, the discounts available are minimal. The maximum deal for electricity will be 1.961p/kWh and for gas 0.697p/kWh, resulting in higher customer bills.

Some energy-intensive industries will receive higher discounts of 4p/kWh for gas and 8.91p/kWh for electricity. Still, they will only apply to 70% of their energy consumption.

Example 1

A customer signed an electricity contract on January 19, which starts on April 1 2023, for 38p/kWh. The reference wholesale price is below 30.2p/kWh; therefore, no discount is applicable.

Example 2

We see a dramatic rise in gas prices during March 2023, and the wholesale cost increases to 13.2p/kWh. A customer then signs a contract for their gas supply, and as wholesale prices are higher than the benchmark of 10.7p/kWh, they are eligible for the discount.

The discount, however, is only 0.697p/kWh and will not offset the market increase. If you signed contracts at a fully delivered price of 17p/kWh, your supplier would discount your energy invoice to 16.303p/kWh.

Key takeaways

In summary, current wholesale prices are way under the price point where businesses will receive support from the Energy Bill Discount Scheme. And even if they do increase, the discount will not offset those increases. We suggest that customers take advantage of the current lower wholesale prices and lock in contracts, providing price certainty whilst markets remain volatile.

We suggest that customers take advantage of the current lower wholesale prices and lock in contracts, providing price certainty whilst markets remain volatile – Joshua Greaves, Acorn Energy.

You can find further information on the scheme at www.gov.uk.

At Acorn Energy, we understand this can be overwhelming for business owners. Whether you have fixed your renewal this year, are out of contract and are wondering when it would be best to renew, we’re here to help.

We can answer all questions and explain what the latest announcements mean for you and your business. Please get in touch today at 01789 777725 or visit acorn-energy.com so we can help you keep your energy costs low.

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About the Author:

Joshua Greaves is the Managing Director at Acorn Energy, offering honest and credible advice to save you time, effort and money on your utilities.