The government has revealed plans to implement a new Energy Bills Discount Scheme for businesses, set to come into effect from April 2023. This scheme will replace the Energy Bill Relief Scheme, which was introduced in 2022 and catered to UK businesses and other non-domestic energy consumers, including charities and schools. As part of this scheme, a cap of £211 per megawatt hour (MWh) for electricity and £75/MWh for gas was implemented for a period of six months.
The new scheme on the other hand will provide eligible non-domestic consumers with a discount per unit on wholesale prices for an extra year, rather than a fixed maximum price. However, this discount will only apply when wholesale prices exceed £302/MWh for electricity and £107/MWh for gas.
How the scheme will work
Starting from April 1, 2023 until March 31, 2024, eligible non-domestic customers with a licensed energy supplier will receive a reduction of up to £6.97/MWh on their gas bill and up to £19.16/MWh on their electricity bill.
To qualify for the discount, the contract's wholesale price must surpass the threshold price set at £107/MWh for gas and £302/MWh for electricity. The discount will be calculated by subtracting the threshold price from the contract's wholesale price and will be phased in gradually until the maximum discount per MWh is achieved for the respective fuel.
If a business's contract wholesale price for electricity is £300/MWh or lower, they won't receive any discount. If their contract price is between £302/MWh and £309/MWh, they will receive a discount of up to £8/MWh to bring their price down to the threshold value. A business whose contract price is £330/MWh will receive the maximum discount of £19.61/MWh, resulting in a reduced price of £310.39/MWh.
Similar to the previous scheme, eligible businesses will not be required to apply for the discount. The discount will be automatically applied by the suppliers to the bills of all eligible customers. The government has allocated a budget of £5.5 billion for the scheme based on estimated volumes.
More information on the Energy Bills Discount Scheme is available on the government's website: https://www.gov.uk/guidance/energy-bills-discount-scheme