The UK Energy Market: What’s Going on Right Now

Why are energy prices increasing?

Gas and Electricity are becoming more expensive not only for domestic users but for businesses as well. It’s mainly down to the pressures being put on Gas supplies, with reductions and the concern for further reductions, from Russia.  Renewables output from Wind technology remains erratic, requiring expensive Gas to be available to generate Electricity. We are also Exporting Electricity to the continent due to their own generation issues.

The closure of the Nord Stream 1 pipeline that takes Gas from Russia to Germany, was closed due to maintenance but has since been sabotaged, reducing the amount of Gas that can be delivered to Europe this winter, and has helped cause Gas prices to surge.

What is the Energy Bill Relief Scheme?

The Energy Bill Relief Scheme 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 reduced Wholesale cost, as long as they are contracted, and it was entered from December 2021. This has been revised from the initial date of April 2022. This capped cost will last for six months, between October 2022 and March 2023. There may be further assistance for targeted industries at the end of the scheme.

The capped Wholesale costs will be:

• £211 per MWh for Electricity
• £75 per MWh for Gas

Those that choose not to enter a contract for the six months, will receive a Wholesale price discount from the supplier’s non-contracted rates, meaning there is the potential for charges to exceed the capped cost.

• £345 per MWh for Electricity
• £91 per MWh for Gas

How does the Energy Bill Relief Scheme effect your business?

Attempting to plan ahead and work out the specific discount you’re going to get is unfortunately very difficult. Also, how the discount is calculated will depend on whether your business has fixed energy supply contracts, flexible or if you are currently on a non-contracted rate.

If you are not contracted for the six-month period, the advice is to sign into a fixed deal to benefit most from the scheme.

What happens after the six months?

The scheme will be reviewed halfway through (early January 2023) to assess its effectiveness and to support decisions beyond March 2023. The government has stated that, following this six-month period, additional support may be targeted at vulnerable sectors. At the moment we are unsure of the finer details and what will be deemed at a ‘vulnerable sector’.

Is the Energy Bill Relief Scheme the same as an energy price cap?

It’s important to note that it works differently to a price cap. An energy price cap sets a limit on the maximum amount suppliers can charge on each unit of energy you use. Rather than capping rates, the government will discount the Wholesale price that suppliers pay for energy. For this scheme your unit rate and energy bill will include various other industry charges.

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 our 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.

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