Why are energy prices increasing?
Gas and Electricity prices remain high despite some significant falls over the last month. The main reason for this has been the conflict between Russia and Ukraine, although there are other factors which have contributed.
Initially Russia started to hold back supplies of Gas into Europe as a way of trying to influence decision making by the EU. What actually happened was the EU and G7 members imposed a series of sanctions and price caps on Russian Oil and Gas, whilst looking to source supplies from elsewhere. The concern which has been built into wholesale prices, is that in the event of low Gas Storage levels and a harsh winter, that supplies of Gas could run out. Fortunately, good supplies of LNG, a mild winter so far, and some energy reduction policies, have meant we are in a much more positive position than was feared.
What is the Energy Bills Discount Scheme?
The Energy Bills Discount Scheme (EBDS) will be the replacement of the Energy Bill Relief Scheme (EBRS), effective 1st April 2023. It is designed to give all non-domestic customers, including the voluntary sector (such as charities) and the public sector (such as schools and hospitals) access to a phased in maximum discount when the customer’s wholesale cost exceeds the defined thresholds. This will last for 12 months until 31st March 2024 and will apply to contracts that were put in place on or after 1st December 2021 and non-contracted arrangements. Those companies that are classed as Energy and Trade Intensive Industries (ETII) will receive a more attractive discount once applied for.
The capped wholesale discount costs will be:
- £19.61 per MWh for Electricity
- £6.97 per MWh for Gas
The thresholds:
- £302 per MWh for Electricity
- £107 per MWh for Gas
How does the Energy Bill Relief Scheme effect your business?
As with the EBRS, energy suppliers will automatically apply these standard discounts. Although the levels of assistance are lower and are based on a high wholesale cost, the price of Gas and Electricity has fallen recently. There will be less exposure to high costs, which had been a significant concern before these schemes were implemented in October 2022.
What happens after the 12 months?
The cost of these schemes over the full 18 months is thought to be in the region of £24 billion, the EBDS being £5.5 billion over the 12-month period. It is impossible to know what will happen in the energy markets during this period and although it is unlikely we will see a return to what had been regarded as normal pricing, there is the hope that rates will continue to fall.
What if you can’t afford to pay your business energy bills?
If you are struggling to pay your energy bills, it’s important you speak to your trusted energy consultancy or supplier as soon as possible. You may be able to put in place a repayment plan. Missed payments can result in disconnection cutting off your energy supply and additional penalty charges. Please get in touch with us if you need to discuss this further.
What can I do to reduce my bills?
Although you can’t completely control energy costs, there are some simple steps you can take to reduce your consumption to help keep bills down. For example, making sure employees turn off lights when they leave at the end of the day and only boiling the amount of water, they need to make a cup of tea. They may seem like small steps, but they can have a big impact on your bills.
Check out our recent energy saving advice blog for some more tips!
Link to ETII: 230104_ETII_List_for_gov.uk.pdf (publishing.service.gov.uk)
Link to EBDS: https://www.gov.uk/guidance/energy-bills-discount-scheme
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