New Energy Bill Discount Scheme and its impact explained

Some businesses will see a 90%+ cut in government energy bill relief from April, sparking concerns that rising bills could put firms under unless they take action to cut energy wastage.  

Since October 2022, the government has been providing relief on business energy bills through its Energy Bill Relief Scheme (EBRS) to soften the blow of high energy costs.  
 
The EBRS, which ends on 31 March 2023, is expected to cost the exchequer over £18 billion. The government has always maintained that the scheme is unsustainable in the long-term and would need to be scaled back significantly come April 2023, despite energy prices remaining extremely high by historical standards.  
 
As such, the EBRS’ long-awaited replacement, called the Energy Bill Discount Scheme (EBDS), will mean a considerable increase in energy bills for many businesses when it comes into force.  

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How the new scheme works 

The EBDS will run from 1 April 2023 to 31 March 2024 and will be applied to bills automatically in the same way as the EBRS. Eligibility remains unchanged, covering those: 

• on existing fixed price contracts with licensed energy suppliers agreed on or after 1 December 2021 
• signing new fixed price contracts 
• on deemed or out-of-contract or standard variable tariffs 
• on flexible purchase of similar contracts. 

For the vast majority of businesses, the level of discount available will be set at a maximum of 1.961p/kWh for electricity and 0.697p/kWh for gas. This is far lower than the relief provided by the EBRS, which for some businesses can be as high as 55p/kWh and 17p/kWh respectively, depending on when they signed their energy contract. 
 
The wholesale price threshold for support is also set far higher at 30.2p/kWh for electricity and 10.7p/kWh for gas, compared to 21.1p/kWh and 7.5p/kWh under the EBRS. This means some businesses will no longer qualify for support, including many of those who agreed their energy contracts before July or after mid-December 2022.  
 
A small number of ‘Energy and Trade Intensive Industries’ considered especially vulnerable to high energy prices will receive a higher level of support, though for many eligible businesses this will still be at a lower rate than under the EBRS.   
 
Commenting on the changes, Robert Buckley, head of relationship development at energy consultancy Cornwall Insight, said: “Come 1 April businesses will be back to prices in their contracts that are much more market-related. They could well see very substantial price rises. Those who entered fixed contracts at high points in the market, where the term over-hangs the transition to the EBDS, could see their bills doubling in some cases, at least until their contracts come to an end.” 

Reaction 

While the 12-month timespan of the new scheme has been widely welcomed, many business groups have reacted angrily to the level of support available. The Federation of Small Businesses (FSB) described it as “out of touch” with reality and the British Chambers of Commerce (BCC) as “nowhere near far enough.”  
 
Others argue that it was unrealistic to expect the government to continue to prop up the energy market to such an extent and that businesses have no choice but to take measures into their own hands. 

‘Businesses must take the initiative’ 

Experts agree that reducing energy demand through energy saving technologies and initiatives is the only sure-fire way to bring energy costs under control in the long-term.  
 
“It has never been more important for organisations to take action to reduce energy consumption and especially to reduce energy wastage,” commented Lindsay Ventress, operations manager at global environmental consultancy EcoAct.  
 
“Businesses ultimately can’t rely on government commitments and must take the initiative into their own hands, carefully examining and identifying energy efficiency actions that will help lower their energy bills but also reduce emissions right now. Irrespective of the industry, business leaders must scale up energy efficient solutions across their workplaces and operations, not only to contribute to wider business sustainability strategies but also to free up funds for other parts of the company.”