How does the Energy Bills Discount Scheme work?

From April 1, the Energy Bill Relief Scheme will be replaced with the Energy Bills Discount Scheme. How will it affect your small business?

The government will be replacing the Energy Bill Relief Scheme (EBRS) with the Energy Bills Discount Scheme (EBDS) on April 1, 2023.

This new plan amounts to a drastic cut on EBRS. The current scheme is worth £18bn whereas the replacement will be capped at £5.5bn. It will run until the end of March 2024.

We take a closer look at what the new support programme entails.

Am I eligible for the Energy Bills Discount Scheme?

Businesses eligible for the Energy Bills Discount Scheme are:

  • On existing fixed price contracts that were agreed on or after December 1, 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’ (DAI) tariffs (Northern Ireland scheme only)

Businesses are set to receive a per-unit discount on their energy bills during the 12-month period, up to a maximum discount. The relative discount will be applied if wholesale prices go above a certain price threshold. For most businesses, these are:

  • Electricity – £19.61 per megawatt hour (MWh) with a price threshold of £302 per MWh.
  • Gas – £6.97 per MWh with a price threshold of £107 per MWh

Energy-intensive and trade-intensive industries will be eligible for greater support. The maximum discounts and price thresholds for these sectors are:

  • Electricity – £89 per MWh with a price threshold of £185 per MWh
  • Gas – £40 per MWh with a price threshold of £99 per MWh

Most businesses won’t have to do anything – your energy provider will automatically apply the discounts to the bills of eligible customers. The discount will be applied in pence per kilowatt hour.

However, energy and trade-intensive sectors will have to apply for the greater support. The government has yet to confirm details of this.

Find out more, plus examples, at the Government website

How does the Energy Bills Discount Scheme compare to the Energy Bill Relief Scheme?

The Federation of Small Business (FSB) has found that 370,000 (28 per cent) of small businesses that signed up to fixed price energy deals last year may have to downsize, rethink their business model or close altogether after the current energy support ends in April.

It gives the example of a pub paying £24,528 a year for energy under the current support scheme – for 48,000 KwH in electricity and 192,000 KwH in gas on a contract signed last August – would be paying £82,539 under the new scheme. It would be receiving £60,000 relief on the estimated £85,000 bill through EBRS. Under the EBDS it’d be receiving just over £2,000 in support.

The body has called for small businesses to be allowed to renegotiate or ‘blend and extend’ their energy contracts that were fixed last year to take advantage of the lower wholesale prices that are available now.

Tina McKenzie, policy chair of the Federation of Small Businesses (FSB) said:

“In a week’s time with the rollback of government support, this group of vulnerable small firms will see their bills revert to high rates. This cliff-edge will also hit consumers as businesses will have to raise prices to cope with soaring bills, driving up inflation.

“Our message to the government is: show the small business community that they’re being treated as equal partner in this energy price crisis. That would keep 370,000 small firms off the cliff as well as the jobs and communities which depend upon them.”

Should I opt for a fixed price energy deal?

If you’re coming to the end of your current energy contract, then it would be a good time to have a look around and lock in the best fixed rate.

Ed Whitworth, head of energy performance at Bionic, said: “Although available to all non-domestic customers on contracted, deemed, and out-of-contract rates, it’s still worth comparing energy quotes and locking in your rates.

“Fixing your rates will guarantee bill stability in what’s still an uncertain market by locking in a consistent price for your energy. And, as with the Energy Bill Relief Scheme, the lower your contracted rates, the lower your discounted rates will be.”

Further reading

Where to find green small business grants – featuring renewable and energy efficiency grants from either local authorities or national organisations promoting sustainability opportunities for UK SMEs.

How to find the best energy supplier for your small business – Which suppliers are out there and how do they compare?

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Anna Jordan

Anna is Senior Reporter, covering topics affecting SMEs such as grant funding, managing employees and the day-to-day running of a business.