Energy bills – support for businesses in 2022
With energy prices soaring, the government has announced a new support package for businesses. We look at the details.
The Energy Bill Relief Scheme will provide a discount on wholesale gas and electricity prices for all non-domestic customers, including businesses, charities, and public sector organisations, from 1 October 2022 to 31 March 2023.
The support is equivalent to the Energy Price Guarantee for households and will be automatically applied to bills. While this provides much-needed certainty for the winter months, businesses should still look at ways to improve energy efficiency and consider how they will manage costs once the temporary support ends.
How the discount is calculated
The government has set a 'Supported Wholesale Price' – expected to be £211 per MWh for electricity and £75 per MWh for gas. The discount applied to a business's bill will be the difference between the actual wholesale price and this supported price. It is important to note that this is a discount on the wholesale element of the bill only; network charges and green levies will still apply, meaning final unit rates will be higher than the supported price.
Fixed vs. variable contracts
The way the discount is applied depends on your contract type. If you agreed a fixed-price contract on or after 1 April 2022, the discount will be automatically applied to bring your wholesale costs down to the supported price. If you are on a default, deemed, or variable tariff, you will receive a maximum discount (subject to a cap). Businesses on variable tariffs may wish to consider locking into a fixed contract now that the level of support is known.
Long-term energy strategy
The Energy Bill Relief Scheme is only a temporary six-month measure. While the government has promised targeted support for vulnerable industries beyond March 2023, most businesses will face a return to full market prices. Now is the time to conduct an energy audit, invest in energy-efficient equipment (potentially utilising the Annual Investment Allowance), and explore options for generating your own renewable energy, such as solar panels, to build long-term resilience.
Disclaimer
The information contained in this article is for general guidance on matters of interest only. It should not be used as a substitute for consultation with professional accounting, tax, legal, or other competent advisers. Before making any decision or taking any action, you should consult a Kingscott Dix professional.