How does the Energy Bill Relief Scheme work?
The government is unable to cap rates for business energy in the same way that it does for household energy. The Energy Bill Relief Scheme isn’t a cap on business energy rates – it’s a discount on business energy rates.
The Energy Bill Relief Scheme will be applied to all non-domestic contracts. This means it will be open to all businesses, including voluntary and public sector organisations.
There are some exceptions, such as power stations, grid-level battery storage facilities, or any business that uses gas or electricity to generate power that will be sold back to the grid.
The only other condition is that all eligible businesses are on one of the following contracts:
- An existing fixed price contract that was agreed on or after 1 April 2022. Or signing up for a new fixed-price contract.
- Deemed rates, out-of-contract rates, or a variable tariff
- Flexible purchase or a similar contract
Before we explain how the Business Energy Relief Scheme works, here’s a quick recap on what makes up your energy rates. To keep it simple, there are basically two costs involved:
Wholesale price – This is the amount suppliers pay for the energy they sell to you. This is the part that will be discounted.
Other costs– This includes things like supplier margins, distribution costs, and green levies. The green levies will be removed as part of the scheme but the rest of the costs will remain unchanged.
Instead of capping business energy rates from October 1, the government will discount the wholesale price that suppliers pay for energy. For the next six months, suppliers will pay no more than 21.1p per kWh of electricity and 7.5p per kWh of gas. This is known as the government baseline wholesale price.
How will the discount be applied?
The government will provide a discount to your unit rates based on the difference between the wholesale cost and the “government-supported price” at the point of signing the contract. You do not need to do anything – you will have the credit automatically applied to your bill each month.
Here’s an example of how it could work for someone on a fixed-rate business electricity deal.
| Fixed contract unit rate (per kWh) | 60.0p | This is the price you pay for each kWh unit of electricity you use |
| Wholesale price | 40.0p | This is the amount of your unit rate that’s made up by the cost of wholesale electricity |
| Other costs | 20.0p | This is the amount of your unit rate made up of other charges (supplier margins, distribution costs, etc.) |
| Government baseline wholesale price (per kWh) | 21.1p | This is the maximum amount suppliers can charge for wholesale electricity under the scheme |
| Energy Bill Relief Scheme discount | 18.9p | This is the amount of discount you’ll get under the scheme. It’s the wholesale cost (40.0p) minus the baseline price (21.1p) |
| Discounted unit rate (per kWh) | 41.1p | This is the discounted amount you’ll pay for each unit of electricity under the scheme. It’s your agreed unit rate (60.0p) minus your discount (18.9p) |
There’s also a ceiling on the amount of discount the government will provide. This is currently set at 40.5p per kWh of electricity and 11.5p per kWh of gas. This means that the higher your rates, the higher your bills will be, even once the discount has been applied.
Here’s an example of how it could work for someone on out-of-contract business electricity rates.
| Out-of-contract rates (per kWh) | 130.0p | This is the price you pay for each kWh unit of electricity you use |
| Wholesale price | 80.0p | This is the amount of your unit rate that’s made up by the cost of wholesale electricity |
| Other costs | 50.0p | This is the amount of your unit rate made up of other charges (supplier margins, distribution costs, etc.) |
| Government baseline wholesale price (per kWh) | 21.1p | This is the maximum amount suppliers can charge for wholesale electricity under the scheme |
| Maximum Energy Bill Relief Scheme discount* | 34.5p | This is the maximum amount of discount that can be applied. |
| Discounted unit rate (per kWh) | 95.5p | This is the discounted amount you’ll pay for each unit of electricity under the scheme. It’s your out-of-contract unit rate (130.0p) minus the maximum discount (34.5p) |
This means that the higher your rates, the higher your bills will be, even once the discount has been applied. The scheme will run for six months from October 1, with a review in three months’ time to help work out if more targeted support is needed for certain sectors.
If you’re out of contract, suppliers can increase your rates at any time. This will leave your business vulnerable to price increases, even while the scheme is running. This is why the government is working with energy suppliers to make sure all business customers in England, Scotland and Wales have the chance to switch to a fixed contract while the scheme is running.
To compare fixed-rate business energy contracts, use our commission-free comparison site
Common questions answered.
What businesses are eligible for the Energy Bill Relief Scheme?
The Energy Bill Relief Scheme will be applied to all non-domestic contracts. This means it will be open to all businesses, including voluntary and public sector organizations.
There are some exceptions, such as power stations, grid-level battery storage facilities, or any business that uses gas or electricity to generate power that will be sold back to the grid.
The only other condition is that all eligible businesses are on one of the following contracts:
- An existing fixed price contract that was agreed on or after 1 April 2022. Or sign up for a new fixed-price contract.
- Deemed rates, out-of-contract rates, or a variable tariff
- Flexible purchase or a similar contract
Check out our FAQ page for more information on the available types of business energy contracts.
How will the Energy Bill Relief Scheme affect your business?
The lower your contracted rates, the lower your discounted bills will be during the scheme.
The Energy Bill Relief Scheme limits the price that suppliers pay for wholesale electricity to 21p per kWh and 7.5p per kWh for gas. Your rate is then cut to this amount, subject to a ‘maximum discount’ of 34.5p per kWh for electricity and 9.1p per kWh for gas.
The scheme is designed to give all businesses a discount on their energy bills for the next six months. But the size of this discount will depend upon the rates you’re paying and the type of contract you’re on.
- High out-of-contract rates – If you’re paying 130p per kWh for electricity and the wholesale costs account for 80p per kWh, your bill could be discounted to 90p per kWh. As in the example above, this is where the maximum discount comes into play. And it’s worth noting that if wholesale prices go up, you’ll pay more. But if wholesale prices go down, you won’t necessarily pay less.
- Medium fixed contract rates – If you pay 90p per kWh for electricity and the wholesale costs account for 60p per kWh, your bill could be discounted to 51p per kWh for the next six months.
- Low fixed contract rates – If you pay 60p per kWh for electricity and the wholesale costs account for 40p per kWh, your bill could be discounted to 41p per kWh for the next six months.
I signed my contract before April 2022, will I still get a discount?
The government has decided that businesses that fixed contracts before April 2022 weren’t exposed to the high wholesale rates, and so you won’t qualify for this scheme.
If my business is in a fixed contract lower than the price cap, what happens?
Your contract will continue, and you’ll pay your bills at the agreed contracted rates.
I have recently agreed to a new energy contract, what happens if it’s more expensive than the price cap?
The government’s Energy Bill Relief Scheme isn’t a price cap like we’ve seen in domestic energy. Instead, the government is reducing the amount that suppliers have to pay for the wholesale power, down to 21p per kWh. Suppliers must pass this discount on to you, by law, as a discount on your bill. This will happen automatically for your new contract on bills between October 2022 and April 2023.
Will the suppliers re-bill my business if we have previously paid a higher rate than the price cap?
The scheme applies during the six-month period between October 2022 and April 2023. This means that the government will apply the discount on your bills within that period. But it doesn’t apply retrospectively to previous bills before that period.
Should you fix your business energy rates?
Although we can’t predict what will happen to energy prices in the future, fixing your rates is the only way to guarantee energy cost stability by locking in a consistent price for your energy and the current discount.
That’s where Digital Energy Revolution can help. We’ll compare rates from a panel of UK suppliers to get our best available fixed rates, commission free, for your business. If you need to fix your rates, use our comparison site, it’s quick, easy, and has no added commission.
Will green levies be removed from my bills?
Yes, the reductions in bills in this scheme include the removal of green levies. Some non-domestic customers’ bills may still show green levies being charged, but in all cases, this charge will be covered by the EBRS discount for eligible energy use.
What happens if I can’t pay even my discounted business energy bills?
If you’re struggling to pay your business energy bills, then you should contact your supplier as soon as possible. Under Ofgem rules, the supplier must offer a reasonably affordable payment plan.
