What could the energy support package cuts mean for your business?
The increase to energy prices over the past 12 months has caused worldwide disruption and prompted governments to step in to support businesses and households in a variety of ways.
In the UK, one such scheme was the Energy Bill Relief Scheme (EBRS). While this has provided much-needed support to businesses for the past four months, the scheme is set to end on 31 March 2023.
So how could this affect your business, and what will the government be offering in place of the EBRS? Read on to find out.
The Energy Bill Relief Scheme is ending on 31 March 2023
The EBRS came into force on 1 October 2022 and was designed to support businesses with rising energy costs.
The scheme capped energy bills for eligible organisations to:
- £211 for each megawatt hour (MWh) / 21.1p for each kilowatt hour (KWh) for electricity
- £75 for each MWh / 7.5p for each KWh for gas.
This was less than the anticipated wholesale cost of energy, which at the time of the announcement was:
- £600 for each MWh / 60p for each KWh for electricity
- £180 for each MWh / 18p for each KWh for gas.
Businesses, voluntary sector organisations like charities, and public sector organisations like schools and hospitals were eligible if they were:
- On existing fixed-price contracts that were agreed on or after 1 December 2021
- Signing new fixed-price contracts
- On deemed, out of contract, or standard variable tariffs
- On flexible purchase or similar contracts
- On variable “Day Ahead Index” tariffs (only in Northern Ireland).
The Energy Bills Discount Scheme will replace the Energy Bill Relief Scheme from April 2023
While the support offered by the EBRS was desperately needed by many, it has come at a huge cost. When the scheme ends on 31 March, the total cost to the taxpayer will have been around £18 billion.
The chancellor has stated that the scheme was “intended as a bridge to allow businesses to adapt” and as such it needed to be “time-limited”.
The government has announced that the EBRS will be replaced by a new scheme called the Energy Bills Discount Scheme (EBDS). The new package balances support for businesses with a limit to public spending on subsidies of £5.5 billion. This is because energy prices have now fallen to the levels seen prior to the Russian invasion of Ukraine.
The Energy Bills Discount Scheme is available to all organisations who were eligible for the Energy Bill Relief Scheme
The EBDS offers a discount on energy prices rather than a cap on total cost and will run from 1 April 2023 to 31 March 2024. The eligibility criteria for receiving the discount are the same as for the EBRS.
Under the EBDS, your bills are discounted by a maximum of:
- £19.61 for each megawatt hour (MWh) for electricity
- £6.97 for each MWh for gas.
However, your business could receive a larger discount if you work in an energy-intensive industry and so are more vulnerable to the increased cost of energy. An example of this is the manufacture of textiles such as leather clothing and knitted or crocheted fabrics.
The discount is applied automatically by your energy supplier
There is no need to apply for support through the scheme because the discount will be applied by your supplier. The first discount will show on your bill in May for your energy usage in April.
You may not receive the discount if you run your business from home. In this case, you will still benefit from the Energy Price Guarantee. This is a scheme that reduces the amount you can be charged for a unit of gas or electricity from the undiscounted price of energy to an annual equivalent of around £2,500 for a typical household until 31 March 2023.
After this date, the cap will be revised so that the typical annual energy bill for an average household will be around £3,000, representing an estimated annual saving of £500 a year compared to anticipated wholesale energy prices.
Just like the EBDS, the discount for this is applied automatically by your supplier so there is no need to apply for it.
5 ways to keep your business energy bills under control
Even though the wholesale price of energy is falling, the new support scheme is designed to help you if you are locked into a fixed-term contract that was agreed when prices were higher, or to protect your business in the event that prices rise again in the coming months.
But if you’d like to do more to keep your bills at a manageable level, here are five suggestions to help you do that.
1. Install a smart meter for your business
A smart meter keeps track of exactly how much energy you are using each day, which can be helpful for monitoring and reducing your usage.
As well as providing you with useful information, it also means that you can only be charged for the energy you use rather than paying a predicted bill.
2. Swap to LED lightbulbs
Switching your lightbulbs to LEDs could help you save a lot of money on your energy bills, as they use 75% less electricity than incandescent lighting. Particularly if your business has a large premises, this could add up to a large saving on your bills over time.
A further benefit is that LEDs tend to last a lot longer than incandescents so you’ll also save money on replacing used bulbs.
3. Book an energy audit for your business
A business energy audit will assess everything in your business that uses energy and compares it against your business needs to discover if there is any wastage that can be avoided. It will consider the equipment you use, the lighting of the building, insulation, and heating and cooling systems, among other areas.
At the end of the audit you’ll know exactly how much energy is being used by each part of your business and have a plan of action to help you reduce any waste that might be costing you.
4. Use energy-efficient equipment
Sometimes energy bills can creep up purely because your equipment is using more energy than it needs to through inefficiencies. While it may not make financial sense to replace machines that are in good working order, whenever you do buy new equipment, check the energy rating and invest in pieces that are more energy-efficient where possible.
5. Involve your team in the energy-saving push
The greatest asset to your business is your team, and reducing your energy bills is no different. Make sure your team are all on the same page by explaining why you want to reduce energy usage and what role they can play.
This includes everyone switching off lights that don’t need to be on, switching off appliances at the end of the day if they don’t need to run overnight, and even being careful not to overfill the kettle when making their teas and coffees.
Get in touch
With costs rising, it’s even more important than ever to ensure you have the correct protection in place for your business.
If you’d like to learn more about how you can protect your business from the impact interruptions to your income, we can help. Email creative@eggarforrester.com or use our contact form to request a callback from our team.
