Firstly, we are incredibly pleased to report the support announced will provide energy help to all businesses regardless of size and sector with only a few basic criteria that must be met to qualify.
Due to the more complex nature of the commercial market the scheme will deliver a reduction on the wholesale price your supplier pays for the energy they supply to your business and this will then be translated into a reduction on the gas and electricity unit rates you see on your bill. The wholesale reductions have yet to be confirmed but the government has indicated that it will be £211 per megawatt hour or 21.1 pence per kWh for electricity and £75 or 7.5 pence per kWh for gas and these reductions will be applied by your supplier automatically. This is obviously fantastic news but it is important to understand these reductions apply to the wholesale element of a bill only and that suppliers will still need to add in their non commodity and other costs, as these additional costs vary from supplier to supplier it is just as important as ever to ensure you are on the right tariff. Non commodity costs have traditionally been around 10 pence per kWh for electricity and 2 pence for gas although they have risen over the last 12 months; at these rates we expect the help for businesses to be roughly equal to that being offered to domestic customers at around 34 pence per unit for electricity and 10 pence for gas. It is important to note, the exact rates will still vary from customer to customer unlike the domestic price cap.
Crucially, for customers on deemed, variable or out of contract tariffs, there is a limit to the discount you can expect to receive and the government has indicated this will be £405 per megawatt hour or 40.5 pence per kWh. If this does become the government’s final position then it is clear that with some such tariffs in excess of 100 pence per unit right now, the lion’s share of the help will be directed to those firms that have fixed their tariffs and we would advise any businesses on variable tariffs to look to secure a fixed deal as soon as possible. Further to this, such customers will still be exposed to any further wholesale increases.
To qualify for support the government has so far indicated that your contract must have started on or after the first of April 2022 provided that the wholesale element of the price the customer is paying is above the £211 level mentioned above. Initially the help will last for six months and will be applied to all bills from October the first, in addition any contract agreed after this date will be subject to the same help and will be revied in line with all other contracts. After the initial 6 months it is likely that further help will only be provided for the most vulnerable sectors, details have not been confirmed but early indications are that this will likely be for schools, hospitals and the care sector amongst others.
As a council if you are on either an out of contract tariff or variable tariff you will not receive the bulk of the benefits laid out, if you are unsure feel free to lean on us through our council energy scheme.
