Energy Bill Discount Scheme from 01.04.2023

Britain announced plans on Monday to scale back energy subsidies for businesses for the next financial year by about 85% to £5.5 billion, after the government described the current level of support as “unsustainably expensive”.

The current six-month programme of energy support that will expire at the end of March was predicted to cost £18.4 billion when the government’s budget watchdog published forecasts in November.

Energy Bills Discount Scheme

As of 1st April 2023, the EBRS becomes the EBDS (Energy Bills Discount Scheme), and applies to business energy users.

For electricity the price threshold is £302/MWh a discount of up to £19.61/MWh can be claimed if this is breached.

For gas the price threshold is £107/MWh and a discount of up to £6.97/MWh can be claimed if this is breached.

For reference, the current electricity prices for next winter are just over £200/MWh and just shy of £30/MWh for gas.

With the current wholesale prices being far below the above thresholds, this will have minimal impact unless we see a rise in costs. There will be businesses that have entered into prices that apply beyond 1st April (when the scheme comes into effect)and will be captured by the aforementioned scheme thresholds.

The finance ministry has been looking at ways to pare back the energy support packages as it tries to stabilise the nation’s public finances after the political and economic turmoil under former Prime Minister Liz Truss’s short-lived government. Under the new programme, businesses rather than government will have to pay the extra costs if energy prices surge.

Extra Support for Energy Intensive Businesses

The new programme will include extra support for some energy-intensive businesses, mostly in manufacturing. Recognising that some non-domestic energy users in Great Britain and Northern Ireland are particularly vulnerable to high energy prices due to their energy intensive and trade exposure, (referred to as Energy and Trade Intensive Industries or ETIIs), these sectors will receive a higher level of support, subject to a maximum discount. The maximum discounts and price threshold for these sectors are:

For electricity – £89 per MWh with a price threshold of £185 per MWh

For gas – £40 per MWh with a price threshold of £99 per MWh

A full list of eligible sectors can be found on the following pages of this blog and via the following link 230104_ETII_List_for_gov.uk.pdf (publishing.service.gov.uk)

Price Volatility

British natural gas prices began to pick up sharply in the second half of 2021, and soared after Russia invaded Ukraine in February 2022. Prices have been extremely volatile since. Although they are now back around the same level as a year ago – and lower than when the current support package was announced – they are still several times higher than in early 2021.

Hunt said he was concerned that the benefit of falling prices was not being passed on to businesses, so he has written to the energy reguator Ofgem asking for an update on whether action is needed. The government had originally been due to publish its proposals for business energy support before the end of 2022, but the decision was delayed, angering some businesses facing uncertainty over their energy bills.

Full details of the Energy Bills Discount Scheme can be found here: Energy Bills Discount Scheme – GOV.UK (www.gov.uk)

For a more detailed discussion on how to navigate your business energy contracts through the current complex trading environment, please contact hello@gleg.co.uk.