Further to the Government’s announcement of the Energy Bill Relief Scheme (the” Scheme”) on 21 September 2022, we have received numerous queries from businesses on the applicability of the Scheme on their energy bills, as countless businesses and organizations struggle under the weight of the current energy  crisis.

We therefore thought it might be useful to address the main changes introduced by the Scheme which are relevant to your businesses.

The purpose of the Scheme

The Scheme, which came into effect on 1 October 2022, provides energy bill relief for non-domestic consumers by way of a discount on wholesale gas and electricity prices between 1 October 2022 and 31 March 2023. The Supported Wholesale Price (the “SWP”) is expected to be £211 per MWh for electricity and £75 per MWh for gas.

How the Scheme works

The Scheme will apply to anyone on a non-domestic contract, including businesses, voluntary sector organizations and public sector organizations*.

Gas and electricity suppliers will apply the reductions to the bills for all the eligible businesses and the Government will then compensate suppliers for the reduction in wholesale gas and electricity prices.

If you are a non-domestic consumer and you get your energy through a landlord/heat network/ energy service company, it is expected that the businesses and other organization pass on the benefits under this Scheme through to the end user in a reasonable and proportionate way. This will ensure support, for instance, to customers of heat networks and park home residents.

A non-domestic consumer which profits from the Scheme in any way other that its purpose of providing relief on necessary energy bills, will be required to refund any profits thereby accrued and may be liable for further penalties. Penalties will become clearer over the coming months and we will update this article when information is available.

* Note, however, that non-domestic suppliers using gas or electricity for the purpose of generating power which would then be sold into the grid, such as power stations or grid-level battery storage, are not eligible for a discount under the Scheme.

Non-domestic contract for which the Scheme applies

The Scheme will apply exclusively on the following contracts:

• Existing and new fixed price contracts

Only non-domestic customers with contract agreed on or after 1 April 2022 will be eligible to deductions under the Scheme.  The deduction will reflect the difference between the SWP and the relevant wholesale price for the day the contract was agreed. The Government will publish the wholesale prices it will use for calculating this for each day from 1 April 2022.

The Scheme will apply where the wholesale element of the price is above the SWP.

• Default, deemed or variable tariffs

The discount will reflect the difference between the SWP and the relevant wholesale price. Any reductions will be subject to the Maximum Discount (the “MD”). The MD is calculated by comparing the government supported price with the average of expected wholesale prices for delivery across the 6 months of the Scheme. The MD , set on 1 October  2022, is £345/MWh for electricity and £91/MWh for gas.  

• Flexible purchase contracts

A flexible purchase contract allows the non-domestic consumer to decide the amount of their electricity demand throughout the term of the contract. The wholesale price for the amount of power made available by the energy supplier to meet the demands of the non-domestic consumer is called the baseload price. The deduction is subject to MD and will be based on the difference between the non-domestic consumer’s monthly weighted average baseload price and the SWP.

Non-compliance

Urgent legislation will be passed in October by Parliament to implement the Scheme. This will provide Government with the powers to establish the Scheme, ensure benefits are passed on to consumers and provide effective compliance and enforcement regime.

We will keep you informed on the further implementation of the Scheme.

Prettys takes pride in having specialist knowledge and skills in the energy sector. Our Commercial Dispute Resolution team will assist you in finding innovative and client focused solutions for your problems. Get in contact: enquiry@prettys.co.uk