Business energy price cap impact
Posted on 22nd September 2022 at 13:02
The government’s Energy Bill Relief Scheme will provide a discount on energy prices to businesses as well as domestic energy users. This also includes schools, hospitals and charities. There are a few key points to understand:
• It applies to all non-domestic users on fixed contracts agreed after 1 April 2022, and those on deemed, variable and flexible tariffs
• It applies to energy usage between 1 October 2022 and 31 March 2023 initially
• The discount will be automatically applied to your energy bill by your supplier which will be seen in the November bills covering October usage
• The discount is applied to the unit rate of gas and electricity only
• The green levies normally added to your bill will no longer apply
• Other levies may still apply
• There is a maximum discount amount which may impact customers on default or variable tariffs, and you will be encouraged to switch to a fixed contract for the duration of the scheme
Heavy energy users
If you are a heavy energy user that is on a flexible purchase contract, you will still be eligible for the energy discount, but this again will have a maximum discount applied. Your energy supplier will calculate your reduction based on your energy contract.
If you are not connected to the gas or electricity grid or use alternative fuels, you will also be entitled to support but details of this are yet to be announced.
So, what does this mean?
The government has calculated that this could reduce energy bills from their expected level from 1 October by over 40%. The media is reporting figures of up to 50% savings. But this is not completely known as the discount only applies to the unit charges which vary depending on your contract and there are many factors that make up your energy bill so the overall reduction against what you may have been paying is unknown. Whatever the cost is, unfortunately, it will be higher than in September and it will be almost double October 2021 prices.
It is also only initially for six months to get businesses through the winter period. A three-month review will take place to decide what will happen after March and who will continue to receive support. It is likely that only vulnerable businesses will continue to receive support.
Planning for energy costs will not be easy and building a forecast for your business because of this and other market increases may be difficult. But remember you are not alone! We are always there for you to help you, so get in touch if you need our support.
One thing you can do to address rising energy costs is to reduce your energy consumption, so you are sheltered from some of the energy price volatility, read our How Can I Save Money on Energy in My Business blog for some ideas.
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