Energy Bill Discount Scheme

The EBDS scheme will extend available bill support for eligible non-domestic customers until 30^th March 2024, but the p/kWh discounts on offer are significantly lower when compared to the provision under the EBRS.

Why the new scheme?

The current Energy Bill Relief Scheme (EBRS) is expected to cost the treasury in the region of £18bn. The Government had been clear that such levels of support were time-limited, intended as a bridge to allow businesses to adapt.

The new Energy Bill Discount Scheme (EBDS) attempts to strike a balance between supporting businesses for a further 12 months and limiting taxpayer’s exposure to volatile energy markets, with a reduced expenditure cap of £5.5bn.

Who is eligible?

As with the current EBRS scheme, Government support may be available to any non-domestic customer who:

• Signed a fixed-price contract on or after 1st December 2021
• Is supplied on a deemed or out of contract basis
• Is supplied in a flexible purchase contract
• Agree a new contract during the scheme period

What support is available?

There are three levels of support outlined under this scheme.

The majority of eligible customers will be covered by the ‘Baseline Discount’ Support. This will apply automatically to relevant customer bills as per current arrangements but will represent a significant reduction on support when compared to the EBRS scheme.

A small number of eligible customers maybe covered by the following support mechanisms:

• The ‘Energy and Trade Intensive Industries (ETII) Discount -this will provide a higher level of support to businesses and organisations in eligible sectors, defined by their SIC code.
• The Qualifying Heat Network discount – this will provide a higher level of support to heat networks with domestic end consumers.

Suppliers will have no role in determining which customers are to be covered by these special mechanisms.

Non-domestic customers who believe they may qualify will be required to register online via a government portal, details of which are forthcoming.

How is the Baseline Support calculated?

Much like the concept under EBRS, eligible customers will receive a p/kWh unit rate discount on their energy bills, calculated in relation to the difference between the supposed wholesale costs of their contract and the government ‘Supported Price’.

However, the ‘Supported Price’ under EBDS:

• Gas ‘Supported Price’: 10.7p/kWh
• Electricity ‘Supported Price’: 30.2p/kWh

And the support available, no matter the calculated difference, is capped at the ‘Maximum Discount’:

• Gas ‘Maximum Discount’: 0.697 p/kWh
• Electricity ‘Maximum Discount’: 1.961p/kWh

Note: The figures represent the ‘Baseline Discount’.

EBRS vs. EBDS: Information for customers who are in contract

All customers will be automatically transferred from the EBRS to the EBDS on the 1^st April 2023 and any relevant discounts will be applied and displayed on invoices as per the below example.

Example 1 (Gas):

• Contracted Unit Rate 18p/kWh
• Reference Wholesale Price 16.43p/kWh (Contract agreed 20/09/2022)
• 12-month contract commenced on 01/10/2022

Please Note: Reference wholesale prices published by the Government to date can be found here

EBRS Discount For any consumption between 01/10/2022 – 31/03/2023 this customer has been eligible for a 8.93p/kWh discount on their unit rate under the current EBRS scheme.

EBDS Discount For any consumption between 01/04/2023 – 01/10/2023 this customer will be eligible for 0.697p/kWh (the maximum rate available) on their unit rate under the new EBDS scheme.

Taking example 1, an invoice would look similar to the below:

Example 2 (Gas):

• Contracted Unit Rate 10p/kWh
• Reference Wholesale Price 10.22p/kWh (Contract signed 10/11/2022)
• 12-month contract commenced on 01/12/2022

EBRS

For any consumption between 01/12/2022 – 31/03/2023 this customer has been eligible for a 2.99p/kWh discount on their unit rate under the current EBRS scheme.

EBDS

For any consumption between 01/04/2023 – 01/12/2023, as the reference wholesale price for this contract is below the EBDS Supported Price of10.7p/kWh, this customer will be eligible for 0 discount under the EBDS scheme.

EBRS vs. EBDS: Information for Out of Contract or Deemed Contract Customers

Throughout the EBRS scheme those supplied on an Out of Contract or Deemed basis have been eligible for the EBRS maximum discount of 9.1p/kWh for gas and 34.5p/kWh for electricity. These discounts have been subject to the relevant floor price of 7.5p/kWh for gas and 21.10p/kWh for electricity.

Under the EBDS, discounts applicable to such variable contracts will be reviewed and published periodically. Support published will not exceed the Maximum Discount level, which has been set much lower than the previous scheme.

Suppliers reserve the right to amend their published Out of Contract/Deemed rates at any time meaning if market prices continue to rise, your price may also increase.

Support for Energy and Trade Intensive Industries (ETII)

Recognising that these energy users are particularly vulnerable to high energy prices, businesses operating in these sectors will receive a higher level of support across 70% of their consumption, with a lower price threshold and a higher Maximum Discount.

• Gas ETII ‘Supported Price’: 9.9p/kWh
• Gas ETII ‘Maximum Discount’: 4.0p/kWh
• Electricity ETII ‘Supported Price’: 18.5p/kWh
• Electricity ETII ‘Maximum Discount’: 8.9p/kWh

Non-domestic customers who believe they may qualify should register online via a Government portal, details of which can be found here

Support for Qualifying Heat Suppliers (QHS)

A Heat Network is defined as “a network that, by distributing a liquid or a gas, enables the transfer of thermal energy for the purpose of supplying heating or hot water to a building or persons in that building”. To further be a ‘Qualifying Heat Network’ it must serve at least one domestic consumer.

There will be no Maximum Discount for QHS.

However, in applying relevant discounts published by the Government, suppliers must ensure that the QHS customers unit rate does not fall below the ‘Minimum Supply Price’.

The Minimum Supply Prices will be set as follows:

• Gas – 7.83* p/kWh
• Electricity – 34.0* p/kWh

*This supply price will be amended to 6.50p/kWh (gas) and 28.24p/kWh (electricity) from the 1st February 2024, and will apply to all fixed and variable contracts entered into on or after this date.

See Government discount published here

Worked Example 1:

A QHS customer agrees a fixed contract for gas on 09/04/2023 at 5.00p/kWh.

Since the unit rate (5.00p/kWh) is below the Minimum Supply Price (7.83p/kWh), the discount the customer receives is 0.

Worked Example 2:

A QHS customer agrees a fixed contract for gas on 09/04/2023 at 15.00p/kWh.

The relevant discount for this QHS customer is 4.6009p/kWh.

The customer receives a discount of 4.6009p/kWh and pays 10.3991 p/kWh for their gas.

Worked Example 3:

A QHS customer agrees a fixed contract for gas on 09/04/2023 at 10.00p/kWh.

The relevant discount for a QHS customer is 4.6009p/kWh.

Applying this discount would give the customer a price of 5.3991p/kWh, which is less than the minimum supply price of 7.83p/kWh.

The customer therefore pays the Minimum Supply Price, meaning a 2.17p/kWh discount has been applied.

Non-domestic customers who believe they may qualify should register online via a Government portal, details of which can be found here

Suppliers will have no role in determining eligibility, non-domestic customers who believe they may qualify will be required to register online via a government portal, details of which are forthcoming.