Energy Bill Discount Scheme: UK Government cuts funding package to shield businesses from energy crisis

The original Energy Bill Relief Scheme was confirmed in September 2022 and launched as October began. At that point, Liz Truss was Prime Minister and Jacob Rees-Mogg was Business and Energy Secretary. Rees-Mogg implemented the scheme for an initial period of six months.

Following Truss’s resignation and Rishi Sunak’s appointment, Chancellor Jeremy Hunt delivered his first Autumn Statement in November 2022, where he confirmed plans to change the Scheme from its original design. Hunt stated that the measures implemented under Truss’s government to freeze energy bills, both for homes and businesses, were too costly in that they were implemented using a ‘blanket’ approach. He argued in favour of more targeted interventions that were not “unsustainably expensive” for the Government to provide.

Hunt has today (9 January) announced plans to replace the scheme, from the start of April, with a new Energy Bill Discount Scheme. While the old scheme capped energy prices in a blanket fashion, businesses can only benefit from the new scheme when prices are at or above £107 per MWH for gas and £302 per MWh for electricity.

At this point, bills will automatically be reduced. The reduction will be £6.97 per MWh for gas and £19.61 per MWh for electricity. This reduction applies to businesses, charities and public sector bodies.

Higher discounts are on offer for energy-intensive businesses such as steelmakers and manufacturers. The threshold at which the discount kicks in is also lower for these firms.

Discounts will be applied automatically through contracts with energy suppliers.

Hunt has not, as originally anticipated, introduced any other plans for bespoke support. It had initially been hoped that there may be different rules for the smallest businesses, plus measures to further support businesses which committed to improving their energy efficiency.

The Treasury said in a statement that it has “been clear” that the levels of support offered through the Energy Bill Relief Scheme were “unprecedented in nature and scale”, but only “intended as a bridge to allow businesses to adapt”.

“The latest data shows wholesale gas prices have now fallen to levels just before Putin’s invasion of Ukraine and have almost halved since the current scheme was announced,” it added.

Green economy reaction

Many groups representing UK Plc have expressed disappointment and concern about Hunt’s chosen approach.

The Federation of Small Businesses had previously urged the Government to avoid “a cliff-edge scenario that would see a raft of business failures”. It has subsequently called the new scheme a provider of “pennies” to SMEs and accused the Government of being “out of touch”.

Union TUC’s general secretary Paul Nowak said: “Ministers must protect jobs and livelihoods from external shocks like the surge in energy prices, but this announcement does not give working people the certainty that they need. 600,000 workers in energy-intensive industries like steel mills, ceramic kilns and factories, and their supply chains, will be especially worried.

“Ministers must do more to make energy affordable for manufacturing. And they must work with employers and unions to future-proof our industries, helping them innovate to cut emissions.”

Planet Mark’s founder and chief executive Steve Malkin said: “Pulling support for businesses at the dawn of a turbulent and uncertain 2023 could be highly disruptive for many of the SMEs that make up the backbone of our economy. Any reduction in support must therefore be paired with long-term energy efficiency guidance and assistance so that Britain’s businesses can continue to reduce their energy cost burdens, in addition to becoming greener and more competitive in the global market.

“We are working with companies that are becoming more sustainable by reducing their reliance on fossil fossils, which in turn is cutting their running costs. They are continuing to win business and thrive as a result. The government must encourage all businesses of all sizes to follow this approach to ensure our entire economy can thrive over the next 12 months and for the long-term.”

EcoAct’s global NZT advisory operations manager Lindsay Ventress said: “With the announcement of reductions in energy bill support from March, it has never been more important for organisations to take action to reduce energy consumption and especially to reduce energy wastage.

“Businesses ultimately can’t rely on government commitments and must take the initiative into their own hands, carefully examining and identifying energy efficiency actions that will help lower their energy bills but also reduce emissions right now. Irrespective of the industry, business leaders must scale up energy-efficient solutions across their workplaces and operations, not only to contribute to wider business sustainability strategies but also to free up funds for other parts of the company.