How to prepare for the end of the Energy Bill Relief Scheme
The ongoing energy price crisis looks set to hit homes and businesses hard this winter, but the government is offering support to help with the soaring cost of gas and electricity bills.
While the Energy Price Guarantee will cap energy rates for households, the Energy Bill Relief Scheme is the one you’ll be interested in as a business owner.
A couple of things to keep in mind are that the Energy Bill Relief Scheme is not a price cap - we’ll explain how it works shortly – and it’s set to end in March 2023. It will then be replaced by the Energy Bills Discount Scheme, which will run until March 31, 2024. This new scheme isn't quite as generous as the one it's replacing, so you could still be hit with higher energy bills when the current scheme ends.
So, is there anything your business can do to prepare for prices going back up next year? Let’s take a look.
What is the Energy Bill Relief Scheme?
The Energy Bills Relief Scheme is 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?
How much is the discount for businesses?
The amount of discount your business gets will depend upon the rates you’re paying and the type of contract you’re on.
If you are on a fixed contract, your discount will be worked out by calculating the difference between the government-supported price and whatever the wholesale price was the day you signed your contract.
For reference, the government-supported price is 21.1p per kilowatt hour (kWh) of electricity and 7.5p per kWh of gas.
For variable, deemed and all other contracts, the discount will be based on the difference between the government-supported price and the wholesale price. But if you’re on any of these variable contracts, a maximum discount of 34.5p per kWh of electricity and 9.1p per kWh of gas will be applied. This means that your bills could still be higher than if you were on a fixed-rate deal, even with the discount applied.
If your business is on a variable or flexible contract, you need to weigh up whether you’d sooner fix your prices for bill stability and the possibility of lower discounted rates, or stick with the flexibility of your current deal.
What is the eligibility for the scheme?
The scheme is only applicable to non-domestic energy contracts. It’s open to businesses of all sizes as well as voluntary organisations and charities. Public sector premises, such as schools and care homes, are also eligible for the scheme.
The discount is automatically applied to all variable, flexible, and deemed contracts. If you’re on out-of-contract rates, you’ll also get an automatic discount.
If you’re on a fixed contract, you’ll only be eligible if that contract was agreed on or after December 1, 2021. Again, the discount will be automatically applied to your bills.
There are a few exclusions though. If you run a business that uses gas and electricity specifically to generate power and sell it back into the grid, you will not be eligible for the scheme. An example of an excluded business would be a power station.
When does the Energy Bill Relief Scheme end?
The Energy Bill Relief Scheme is set to run for six months, meaning it’s due to end on March 31, 2023. It will then be replaced by the Energy Bills Discount Scheme, which will run for 12 months.
Do I have to apply for the Energy Bill Relief Scheme?
Eligible businesses don't need to apply to get their discounts. The scheme ensures that energy suppliers automatically take the amount off your bill, so you don’t need to fill out forms or contact your supplier.
How can I prepare my business for the end of the scheme?
There’s no guarantee that the energy market will be more stable, or that prices will have significantly dropped when the scheme ends in 2023. Businesses could see their energy bills soar again when the discount is removed.
Even though further support has been announced, the government has cut funding for these schemes from around £18.5 billion for six months from October 1, 2022 (the Energy Bill Relief Scheme) to £5 billion for 12 months from April 1, 2023 (the Energy Bills Discount Scheme). This means there will be less financial support on offer, so you could still see yourself paying higher energy bills even with the discount applied.
That’s why it’s important to start preparing for the end of the scheme, even though it is being replaced. To get ready, you should make a note of when your current fixed rate deal is ending and make sure your business is as energy efficient as possible.
First up, your energy contract.
- 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 the going rates for gas and electricity will be when the scheme ends, 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.
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. This will become even more important when the Energy Bill Relief Scheme ends and energy bills are no longer discounted.
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 2023.
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 use 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, the volatility in the energy market could mean you’re 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.