What happens when government support for energy bills ends?

High energy prices peaked in 2022 when wholesale electricity rates were an eye-watering £511 per Megawatt hour (MWh). Shortly after prices peaked, the government announced a support package to help businesses cope with expensive energy bills. 

To give you an idea of just how expensive that was, at the time of writing, wholesale electricity rates are currently £69 per MWh. You can find out the current wholesale rates by visiting the Ofgem website.

Support is set to end in a few weeks, so what happens next?

What government support was available for business energy bills?

The government provided two support packages for business energy bills: 

• The Energy Bill Relief Scheme (EBRS) ran from October 1, 2022, to March 31, 2023. 
• This Energy Bills Discount Scheme (EBDS), has been in place since April 1, 2023, and will run until March 31, 2024.

Neither was a cap on business energy rates. Instead, they offered discounted energy prices, depending on how much your contracted rates were.

What was the Energy Bill Relief Scheme?

The Energy Bill Relief Scheme was an initiative set up by the government to help businesses with rising energy costs. The scheme has been running since October 1, 2022, and is set to end on March 31, 2023.

But instead of capping prices as we see with domestic rates, it offers a discount on unit rates. And the amount of discount your business gets will depend upon the rates you’re paying and the type of contract you’re on.

The scheme aims to help all non-domestic customers, this includes businesses that are:

• On a fixed contract (which was agreed on or after December 1, 2022)
• On a deemed contract
• Currently out-of-contract
• On a variable contract
• On a flexible purchase contract

For more information on the different types of commercial energy contracts, check out our guide to business gas and electricity tariffs.

To find out more about how the scheme works, watch the short video below or check out our guide - Does the energy price cap apply to businesses?

What is the Energy Bills Discount Scheme?

The Energy Bills Discount Scheme replaced the Energy Bill Relief Scheme on April 1, 2023. This also provided a discount on eligible non-domestic energy contracts, but funding for this scheme was much less. While EBRS cost around £18 billion for the six months it was running, just £5.5 billion was set aside to cover 12 months of EBDS.

Interestingly, the last time energy rates hit the threshold for EBDS support to kick in was December 18, 2022. More than three months before the scheme launched. You can see a full breakdown of threshold rates by downloading this Excel document from the government website.

To find out more about how the scheme works, watch the short video below or check out our guide to Energy Bills Discount Scheme.

When does the Energy Bills Discount Scheme end?

The Energy Bills Discount Scheme will end on March 31, 2024. It will have run for 12 months and there is no scheme lined up to replace it.

How can I prepare my business for the end of the scheme?

The energy market has settled considerably since the government schemes were introduced. Wholesale prices for gas and electricity have dropped to around what they were at the start of 2021. Day-ahead wholesale rates - also known as spot prices and usually more expensive than buying in bulk and in advance - are now actually at pre-pandemic levels.

There's no way of knowing whether prices will continue to fall, but they will rise again at some point - but it's impossible to say when and how quickly. That's why it's important to keep an eye on when your current contract is set to end and start comparing rates as soon as it's up for renewal - remember, this could be months before its actual end date.

• If you’re on a variable rate contract, it’s worth comparing fixed deals to see if you can lock in lower rates. Not only are variable contracts unpredictable, but if you’re on deemed or out-of-contract rates, you’ll most likely be paying more for your energy. This is because suppliers charge higher rates for businesses that are out of contract.
• If you’re on a fixed-rate deal that’s coming to an end in the next six months, you might be able to agree on a new contract now. Although we’ve no idea what future gas and electricity rates will be, it’s worth comparing suppliers now to see what sorts of rates are on offer. You can then weigh up whether to lock in your rates now or check back each month to see where prices are heading.

When comparing quotes, it's important to keep an eye on the standing charge as well as the unit rate. The standing charge is a flat daily fee that you pay no matter how much energy you use. It covers the costs of providing and maintaining the wires, pipes and cables that deliver power to your premises.

Once you’re clear about your contracts, you need to make sure you’re being billed correctly. If your supplier is estimating your bills, you could be paying more than you need to. You can check your bills are correct by:

• Taking regular meter readings to send to your supplier.
• Asking your supplier if they can take specific steps to keep your bills accurate, like installing a smart meter or a half-hourly meter if your business uses a lot of electricity. Find out more about this type of meter in our guide to half-hourly metering.

Next, you should see if your business is eligible for any other financial help.

What other support is available for small businesses?

It’s always worth looking to see what financial support is available to your business, whether for energy or anything else.

If you struggle to pay your energy bills, you should contact your supplier and discuss your situation with them as soon as possible. They might be able to review your contract or agree on a new payment plan that is more manageable for your business. You can ask for more time to pay, access to hardship funds, payment breaks or a review of your payments in some cases.

If you’ve never looked into what government grants your business is eligible for, you could be missing out on some much-needed cash or subsidies. As far as energy is concerned, you might be eligible for grants or subsidies to help with energy efficiency measures and the installation of renewable energy technologies.

To find out more, check out the government website and take a look at our guide to the best small grants for businesses in 2024.

How can I reduce how much energy my business uses?

Energy efficiency should also be a priority for your business, and getting into good energy habits is always beneficial, regardless of how high your energy bills are. Here are some ways to help ensure your business is as energy-efficient as possible.

There are a few ways to cut the amount of energy your business uses. These include small switches to your routines along with some bigger projects, but whatever your business can manage all adds up.

To limit energy consumption, you could:

• Swap your bulbs — Switch your usual bulbs to modern LEDs, CFL or halogens. Although you may pay out a bit more upfront, the switch could save your business on its energy bills, as these bulbs usually last longer.
• Educate your staff -- Ask your team to switch off their computers at the end of the day, turn off lights if they’re not in use and only run the hot tap in the toilets for as long as they need to.
• Think about the long term — If you’re considering long-term energy efficiency, you could install motion sensors in your corridors and toilets. This will only turn the lights on when someone is using the room.
• Only heat your premises at certain times — Try to limit your heating usage as even overheating your business by a few degrees can drastically increase your energy bills. You could also move any furniture that might be in front of radiators as this can block heat coming through, costing your business more.
• Draught-proof your premises — Draught-proofing is an effective but cheap way to save energy. If you’re letting draughts come through cracks or gaps in windows, you might as well not be heating your premises at all. Maybe look into double glazing to draught-proof your building in the long run.

For more ideas, check out these quick energy-saving tips for SMEs.

Are there any other ways to cut business costs?

It’s tough to cut costs when the price of everything is going up, and you might have some difficult money-saving decisions to make when the Energy Bill Relief Scheme ends.

Although not ideal, you might need to increase your prices to help cover the higher overheads or cut back on any growth plans. You might even need to consider reducing your opening hours, cutting staff hours, or losing some members of staff completely.

There are also some less drastic measures you can take, such as switching to cheaper service or stock providers, making sure you’re not signed up for any subscription services you no longer use, and checking out if your business is eligible for tax relief. You can find out more in our guide to claiming allowances and tax breaks.

Switching to a better deal on other business essentials is a quick and easy way to cut costs without impacting the quality of your goods and services. At Bionic we can compare business phone, broadband, and insurance to help you sort more suitable and competitively-priced contracts.

How can renewable energy save my business money?

If you’re considering the long-term energy efficiency of your business, you might want to think about powering your premises with renewable energy. With this type of energy, it might take a while to reap the benefits. This is because it’s an investment and you only really get returns further down the line. It’s still an option to consider though. Lots of businesses save money on bills as renewable energy isn’t affected by price rises.

The main types of renewable energy are:

• Wind power —  Uses wind turbines to generate electricity for business. Suitable if you have acres of building-free land.
• Solar PV panels —  Uses sunlight to generate electricity. These are easy to install and can be fitted on the side of your building.
• Solar thermal energy —  Uses sunlight to heat the water stored in your hot water tank. These are easy to install and can be fitted on the side of your building.
• Biomass systems — Generates electricity and heat by burning or fermenting organic material, such as straw or wood pellets, with a combined heat and power plant.
• Anaerobic digestion — Generates heat and electricity by burning the methane produced by breaking down organic material, such as plant or animal waste. Suitable if you have a lot of space to store the fuels.
• Geothermal and ground source heat pumps —  Use low-level heat naturally contained in the ground to provide both heating and cooling. These are fitted on the side of your building.
• Combined heat and power — Uses a CHP system to capture the heat produced by your electricity to heat your water.
• Hydroelectric power — Generates electricity from the water flowing through an immersed turbine or water wheel. These are site-specific but can provide a reliable energy source.

To read more about renewable energy and the pros and cons, check out our guide to renewable energy for small businesses.

What should I do if I want to sign a new energy contract?

If you’re on a variable rate, including out-of-contract and deemed rates, you're probably overpaying for energy. Although we can predict what will happen with future energy prices, it’s worth comparing business energy suppliers to see if you can get a competitive fixed-rate deal. 

Fixing your rates is the only way to give your business some certainty around the cost of its energy bills and protect against any future price rises. Our tech-enabled experts are on hand to talk you through your options and help you work out what’s best for your business.

If your business energy supplier has gone bust or ceased trading, you’ll most likely be placed on variable rates by your new supplier. There will be more competitive rates out there and you can switch at any time.

How can Bionic help your business? 

It can be stressful navigating the energy crisis as a small business. At Bionic, we are here to answer any questions you may have and are on hand to compare trusted suppliers for you, should you want to switch. 

We can also take the stress out of business admin, freeing up time for you to focus on keeping your business secure. 

This is where Bionic can help you save time, hassle, and unnecessary admin when sorting business essentials. We compare business gas and business electricity, as well as business phone and broadband to help make sure you're on the best deals. 

We can also help with business insurance and business finance. Get in touch to find out more.