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Industry insights

The impact of the the energy price cap

Amanda Byrne

22nd September 2022

The rise in wholesale energy costs

The Energy or Wholesale element of your bill typically accounted for around 40% of your electricity bill and represents the raw costs of your electricity and metering. It's price is determined by global energy market dynamics and your supplier and varies on a daily, even hourly basis.

However, as you are very aware, this element of your electricity bill has seen unprecedented increases in the past 12-24 months and as a result this now accounts for around 70% of your bill!

Electricity Bill breakdown 2022

Help is at hand for businesses!

The Government announced (Sept 2022) that they would look to fix the wholesale gas and electricity (power) prices to support non-domestic energy users including businesses, public sector organisations, and charities.

As a result, the Energy Bill Relief Scheme (EBRS) was introduced. This scheme applies a discount to gas and electricity unit rates for the majority of non-domestic energy customers covering their consumption from 1 October 2022 to 31 March 2023.

Published discounts for all eligible customers cannot take their unit price below 21.1p/kWh for electricity and 7.5p/kWh for gas. and will be applied from 1 October 2022 to 31 March 2023.

Who is eligible for the EBRS?

The scheme is available to customers on a non-domestic energy contract who are:

  • On existing fixed price contracts that were agreed on or after 1 December 2021 (even if the contract starts later)
  • Signing new fixed price contracts
  • On out of contract, variable or deemed rates
  • On flexible contracts

This Government Guide outlines how much the EBRS discounts to customer unit rates will be for fixed and variable contract types.

Do I need to apply for the EBRS discount?

No. All energy suppliers must automatically apply a discount to unit rates. There’s no need to contact us to claim the EBRS discount. However, if you get a message asking for your bank details, this could be a scam so take care.

The impact of the price cap

The proposed price cap for those on fixed contracts, signed on or after 1st April 2022 is less than half the current wholesale market price (Oct 2022). 

impact of price cap energy

The EBRS will cap to the wholesale energy costs but excludes all other non-commodity elements such as environmental taxes and network charges. Therefore businesses need to be aware that these will still be added on top of the unit rate on their energy bills. 

Businesses on flexible, default, deemed or variable tariffs will receive a per-unit discount on energy costs, up to a maximum of the difference between the supported price and the average expected wholesale price over the period of the scheme. The amount of this “maximum discount” is currently around 34.5p/kWh for electricity and 9.1p/kWh for gas during the support scheme.

The 'maximum discount' for fixed contracts is currently announced the week after the contract is signed and is based on the difference between the wholesale price the week the contract was signed and the government supported prices (21.1p and 7.5p for electricity and gas respectively). 

Need help with your energy purchasing during these turbulent times?

We have helped over 70 businesses in the last few months secure and manage their energy contracts giving invaluable peace of mind and pocket!

So if you are having problems renewing your energy contracts and want to consider an alternative purchasing option, which does not lock you in and gives the opportunity to react to daily market fluctuations, please give us a call

 

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