A new business energy support scheme is set to run from 1 April 2023 to 31 March 2024 but will be less generous than the scheme currently in effect. Businesses with energy costs below £107/MWh for gas and £302/MWh for electricity will not receive any support.
The current scheme runs until 31 March 2023 and is based on fixed prices. The new scheme will instead provide a discount on wholesale prices.
The new discount
Businesses will receive a unit discount of up to £6.97/MWh unit discount on gas bills, with a discount of up to £19.61MWh on electricity bills. The discounts only apply above a threshold level of £107/MWh for gas and £302/MWh for electricity.
- At first glance that might not seem too bad, but energy billing is in kWh. When converted – two pence off a kWh of electricity and just over half a penny for gas – the reduction can be seen as much less generous.
- Many smaller firms are struggling to pay energy bills even with existing support. For a typical retail store, the total reduction over the 12 months under the new scheme will be just £400.
- As for the current scheme, the discount will not be available to businesses on existing fixed-price contracts agreed prior to 1 December 2021.
Although businesses do not need to take any action or apply for the new scheme, they should be aware of how the changes from 1 April 2023 will impact their cash flow forecasts.
Energy and trade-intensive businesses
A higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive. Similar to the current scheme, the discount for these businesses will reflect the difference between government-supported prices and wholesale prices.
Businesses may need to register for this additional support. A full list of eligible energy and trade-intensive sectors can be found here.