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The Energy Bill Relief Scheme
The government has finally announced the energy bill support package for business. It’s a move that has been welcomed by many as it allows for a period of certainty, despite concerns about what happens after the initial 6-month period comes to an end next April.
The Government Energy Bill Relief Scheme is a huge intervention by Liz Truss’s new administration, and the levels of support for non-domestic users are unprecedented. The final cost will not be clear for some time but estimates are in the region of tens of billions of pounds and will be paid for by increased borrowing.
In summary
This initial support package will cap the price of gas and electricity per unit from October 1st until 31st March, which means that energy bills for non-domestic users are estimated to be reduced by around half. The price will be fixed at £211per megawatt hour (MWh) for electricity and £75 per MWh for gas. For comparison, wholesale costs in England, Scotland and Wales for this winter are currently expected to be around £600 per MWh for electricity and £180 per MWh for gas.
The scheme will apply to fixed contracts agreed on or after 1st April, and variable and flexible tariffs and contracts. The savings will be applied automatically and first seen in October bills, typically received in November.
As business energy usage is complex and depends on a number of factors, the level of price reduction for each business will vary depending on contract type and circumstances. So while everyone will see a price hike, and energy bills will still be significantly higher than this time last year, the government action means rises will be far less than anticipated. This will provide some much needed breathing space, even if it does not solve what happens in 6 months’ time.
For now all businesses, however small or large, will get the same support for the first 6 months. From April next year support will be targeted.
Review due
In 3 months’ time, the government will carry out a review to inform decisions on future support after next March. The review will focus on identifying the most ‘vulnerable’ non-domestic customers and how to continue assisting them with energy costs.
Deciding which businesses are the most vulnerable will be key. It could be argued that most, if not all, businesses could potentially be ‘vulnerable’. With uncertainty over inflation, interest rates, the value of the pound and the price of imports and commodities, market volatility will be a defining factor for many firms during the coming months. Economic growth over the next year is uncertain and no business is immune to increased overheads due to the cost of living rises. However, at present, the government is indicating that the most vulnerable are likely to be those who are least able to adjust - for example by reducing energy usage or increasing energy efficiency.
The review will take into account how effective the scheme has been in giving support to vulnerable non-domestic customers and look at how to continue supporting them without a gap. The latest current and forecasted energy price will be taken into account alongside sector, size and geography, as well as other cost pressures.
Planning ahead
Firms will have to make decisions about their short term future. Although 3 months until review is not long, some decisions will have to be made ‘blind’ or pushed forward. Trimming back on extras such as hospitality and additional staff benefits like the Christmas party won’t be too much of a problem, but thought may have to be given to more sensitive issues such as managing staffing levels and a potential reduction in office hours. For some companies this will be easier than others. Where support continues for a company, decisions will become clearer after the review.
For those deemed non-vulnerable, energy savings will be especially important after the 6 month cut off point. The government is urging users who are less vulnerable to energy price increases to use the support period to identify measures they can take to protect themselves against high energy prices. Therefore understanding what will happen in April becomes extremely important for these firms.
Predictions on future pricing are hard to make. Gas prices have come down in recent months, but this was from a very high base. Stockpiling of gas for the winter months has now taken place so cost may continue to be pushed further downward. What we do know is that the wholesale energy market is volatile and, in part, depends on global events.
Customers need all the help they can get
Having supported thousands of agents through uncertain times and tricky market conditions since 2009, we understand the many pressures facing property professionals at this time.
Whatever support and guidance you need, your dedicated Customer Development Manager is on hand to help protect your business with their knowledge and expertise. You can get in touch by phone, email, or the contact form on our website.
Rent4sure is here to protect and support your business. To find out more, contact us today on 0330 088 3774 or click here.
The Government Energy Bill Relief Scheme is a huge intervention by Liz Truss’s new administration, and the levels of support for non-domestic users are unprecedented. The final cost will not be clear for some time but estimates are in the region of tens of billions of pounds and will be paid for by increased borrowing.
In summary
This initial support package will cap the price of gas and electricity per unit from October 1st until 31st March, which means that energy bills for non-domestic users are estimated to be reduced by around half. The price will be fixed at £211per megawatt hour (MWh) for electricity and £75 per MWh for gas. For comparison, wholesale costs in England, Scotland and Wales for this winter are currently expected to be around £600 per MWh for electricity and £180 per MWh for gas.
The scheme will apply to fixed contracts agreed on or after 1st April, and variable and flexible tariffs and contracts. The savings will be applied automatically and first seen in October bills, typically received in November.
As business energy usage is complex and depends on a number of factors, the level of price reduction for each business will vary depending on contract type and circumstances. So while everyone will see a price hike, and energy bills will still be significantly higher than this time last year, the government action means rises will be far less than anticipated. This will provide some much needed breathing space, even if it does not solve what happens in 6 months’ time.
For now all businesses, however small or large, will get the same support for the first 6 months. From April next year support will be targeted.
Review due
In 3 months’ time, the government will carry out a review to inform decisions on future support after next March. The review will focus on identifying the most ‘vulnerable’ non-domestic customers and how to continue assisting them with energy costs.
Deciding which businesses are the most vulnerable will be key. It could be argued that most, if not all, businesses could potentially be ‘vulnerable’. With uncertainty over inflation, interest rates, the value of the pound and the price of imports and commodities, market volatility will be a defining factor for many firms during the coming months. Economic growth over the next year is uncertain and no business is immune to increased overheads due to the cost of living rises. However, at present, the government is indicating that the most vulnerable are likely to be those who are least able to adjust - for example by reducing energy usage or increasing energy efficiency.
The review will take into account how effective the scheme has been in giving support to vulnerable non-domestic customers and look at how to continue supporting them without a gap. The latest current and forecasted energy price will be taken into account alongside sector, size and geography, as well as other cost pressures.
Planning ahead
Firms will have to make decisions about their short term future. Although 3 months until review is not long, some decisions will have to be made ‘blind’ or pushed forward. Trimming back on extras such as hospitality and additional staff benefits like the Christmas party won’t be too much of a problem, but thought may have to be given to more sensitive issues such as managing staffing levels and a potential reduction in office hours. For some companies this will be easier than others. Where support continues for a company, decisions will become clearer after the review.
For those deemed non-vulnerable, energy savings will be especially important after the 6 month cut off point. The government is urging users who are less vulnerable to energy price increases to use the support period to identify measures they can take to protect themselves against high energy prices. Therefore understanding what will happen in April becomes extremely important for these firms.
Predictions on future pricing are hard to make. Gas prices have come down in recent months, but this was from a very high base. Stockpiling of gas for the winter months has now taken place so cost may continue to be pushed further downward. What we do know is that the wholesale energy market is volatile and, in part, depends on global events.
Customers need all the help they can get
Having supported thousands of agents through uncertain times and tricky market conditions since 2009, we understand the many pressures facing property professionals at this time.
Whatever support and guidance you need, your dedicated Customer Development Manager is on hand to help protect your business with their knowledge and expertise. You can get in touch by phone, email, or the contact form on our website.
Rent4sure is here to protect and support your business. To find out more, contact us today on 0330 088 3774 or click here.