To put the rises into context, in August 2022 the gas wholesale price reached highs of over 600p/therm. Over the same period in 2021 this was just 120p/therm.
The impact of these increases will be particularly acute this winter for businesses who have existing agreements ending, or who are already on out of contract rates.
Given the issues with wholesale prices, on the 21st of September the government announced the Energy Bill Relief Scheme (EBRS), a package of support to help businesses of all sizes manage the impact of unprecedented wholesale energy price rises this winter.
I and my colleagues at TotalEnergies Gas & Power very much welcome this package of support for UK businesses when they need it most. This support is broad in approach and will impact businesses of all sizes, the voluntary sector (e.g. charities) and public sector organisations (e.g. hospitals and schools).
Further targeted support for certain vulnerable businesses and sectors beyond the end of March 2023 has also been referenced by government, and this is likely to be required as the market dynamics are unlikely to change significantly in the short term. A review of what this further support will look like is due to take place in the coming months.
The EBRS will run from 1st October 2022 – 31st March 2023 across Great Britain and the government will provide a discount on energy bills for non-domestic customers. The discount will apply to deemed (out of contract), variable and flexible contracts.
It will provide a discount to customers but there are some specifics on how it will work on each customer type:
Deemed (Out of Contract)
Those on deemed or out of contract rates will receive a per-unit discount off their bills, up to a maximum of the difference between the ‘government supported price’ and the average expected wholesale price over the period of the scheme. This means that deemed customers will get reduced bills – but there is a chance the bills could go up during the scheme if the wholesale market goes higher than the government forecast.
The government is keen that all deemed customers get the opportunity to move to a fixed contract, and TotalEnergies Gas & Power is committed to offering all our MBC customers, including those on out of contract rates, a contract option. If you are on out of contract rates with TotalEnergies Gas & Power you should get in touch to discuss the available options.
Customers on fixed price contracts that agreed a contract on or after 1st April 2022 will be eligible for support, provided that they are paying above the ‘government supported price’. Customers entering new fixed price contracts after 1st October will receive support on the same basis, although the discount amount will not be known at the point of sale.
The discount will be calculated monthly and will depend on the difference between the monthly weighted average baseload price and the ‘government supported price’. The difference between these two will form the discount, although the government have announced that this support will be capped.
The government has been clear that suppliers and consumers must not profit from the scheme other than for its intended purpose of providing relief on energy bills, and are legislating to this effect. Customers should continue to trade as normal, and the government expect customers to continue to execute their normal purchasing strategies.
We’ve had lots of questions from customers asking what they need to do to ensure they get the EBRS discount, and the simple answer is ‘nothing’. This discount will be automatically applied to all eligible businesses, with the discount first being applied on October consumption. We’ll be letting eligible customers know if they are eligible.
For further information you can view the government’s press release, the explainer document and visit our Energy Bill Relief Scheme FAQs.