Is there an energy price cap for business?

*Updated December 18, 2023.

There is no price cap on business energy, only on domestic energy. 

Instead, the government introduced the Energy Bills Discount Scheme. This offers discounted energy rates on eligible non-domestic energy contracts for 12 months from April 1, 2023.  This scheme is set to end on March 31, 2024, and no further government support has been announced. 

Read more about how The Energy Bill Discount Scheme works and how your business can benefit in our detailed guide. 

Why isn’t there a business energy price cap?

The complexity of commercial energy contracts and the difference in usage between businesses means that a cap on business energy rates would have been difficult to put into practice.  

The difference in how and when businesses use energy can be huge. Although a fish and chip shop and a car manufacturing plant both need electricity to function, the way in which they use this power is completely different. This is why there are no ‘off-the-shelf’ options for businesses and contracts need to be tailored to meet the needs of each individual business.    

And this complexity makes it more difficult to impose one blanket rate across all businesses, so there is no commercial energy price cap. 

The Energy Bills Discount Scheme is designed to reflect the complexity of commercial energy contracts and offer financial support to businesses of all sizes. 

Do we need a cap on energy rates? 

Wholesale energy prices have risen so much over the last 12 months that households and businesses across the UK have been hit with record energy bills. A price cap is one way to help lower the amount customers pay for energy. But it’s not perfect, as we’ll look at in a bit more detail below. 

The energy price cap was introduced in 2019 to limit the amount supplies could charge households on credit meters for gas and electricity. This came two years after the Safeguard Tariff, which caps the unit rate suppliers can charge anyone who pays for gas or electricity in advance using a prepayment meter. 

The reason the cap was brought in was to end what (then Prime Minister) Theresa May described as “rip-off energy prices” that were being charged as a result of Britain’s “broken energy market”. 

The problem with the energy price cap was that it caused prices to bunch around the level of the cap. This meant that the number of cheap energy deals (those that cost less than £1,000 per year) dropped by 90% during 2018, falling from 77 at the start of the year to just eight by the end of it. 

This made the domestic market a lot less competitive. The price cap was even cited as one of several reasons why some energy suppliers went bust or stopped trading over the last few years.  

The energy price crisis forced the government to rethink things. Although the cap still exists for domestic customers, replacing it with the Energy Price Guarantee means these prices are fixed for two years and the planned quarterly review has been scrapped. 

Should you fix your business energy rates? 

Although we can't predict what will happen to energy prices, fixing your rates is the only way to guarantee bill stability by locking in a consistent price for your energy and the current discount. 

That’s where the tech-enabled experts at Bionic can help. We’ll compare rates from a panel of trusted UK suppliers to get our best available fixed rates for your business. If you need to fix your rates, give us a call now on 0800 084 1830 or head to our Business Energy page for more information on switching. 

What was the Energy Price Guarantee? 

The Energy Price Guarantee was a government initiative that worked alongside the price cap to help shield households from the cost of rising energy prices. It limited the amount that domestic energy suppliers could charge for unit rates and standing charges but ended in July 2023 when energy prices fell for the first time in around 20 months.

A new domestic price cap will kick in on January 1, 2024, when an average household paying by Direct Debit can expect to pay £1,928 a year on energy. But this doesn’t mean that bills will be capped at £1,928. If your household uses more energy than the average household, you should pay more. If you use less than the average household, you should pay less. 

It’s important to remember that it’s the unit rate and standing charge that are capped, and not the overall bill. This means that the more energy you use, the higher your bills will be.   

What is the Energy Bill Relief Scheme? 

The Energy Bill Relief Scheme (EBRS) is now closed and has been replaced by the Energy Bills Discount Scheme (EBDS). The Energy Bill Relief Scheme was a discount on business energy bills that ran for six months between October 1, 2022, and March 31, 2023. It was replaced by the Energy Bills Discount Scheme on April 1, 2023. EBRS worked differently from a price cap. Instead of capping rates, the government limited the wholesale price that suppliers pay to generators for energy. 

The savings made by suppliers were passed on to consumers by a cut in the wholesale cost part of the unit rate on all business energy contracts signed after December 1, 2021. The discount was also applied to businesses on flexible, out-of-contract, and deemed rates.

From the six months between October 1, 2022, and March 31, 2023, suppliers paid no more than £211 per megawatt hour (MWh – equal to 1,000 kWh) of electricity and no more than £75 per MWh for gas (or 21.1p per kWh of electricity and 7.5p per kWh of gas). This was known as the government baseline wholesale price.

For businesses on fixed-rate contracts, the discount was the difference between this baseline wholesale price and the rates agreed to when the energy contract was signed. Check out the government website to find out how much the discounts were worth.

If reference wholesale prices fell below this government-supported price, then rates were no longer discounted. This happened on December 26, 2022, meaning that any deals signed between then and January 16, 2023 (the latest data point we have) won't be eligible for a discount under the scheme. 

For out-of-contract, deemed, or any other variable rate contracts, the discount was the difference between the government baseline wholesale price and the relevant wholesale price charged by your supplier. But this discount was subject to a ‘maximum discount’ of 34.5p per kWh for electricity and 9.1p per kWh for gas.

The scheme also removed green levies from your rates, but the VAT on energy bills stayed the same.

Before we explain how it worked on different contracts with different rates, let's first look at the costs that make up your energy rates. To keep it simple, there are broadly two costs involved:

• Wholesale price - This is the amount suppliers pay for the energy they sell to you. This is the part that will be discounted.
• Other costs - This includes things like supplier margins, network costs, and green levies. The green levies will be removed as part of the scheme but the rest of the costs will remain unchanged. 

How did the Energy Bill Relief Scheme work on a fixed contract?

Here's how the discount could have worked for a business on a fixed electricity contract at an agreed rate of 60p per kWh.

^{Please note, all figures are just illustrations of how the Energy Bill Relief Scheme could work, and not examples of the final legislation.}

How did the Energy Bill Relief Scheme work on out-of-contract rates?

Here's how the discount could have worked for a business on out-of-contract electricity rates of 130p per kWh.

^{*Please note, all figures are just illustrations of how the Energy Bill Relief Scheme could work, and not examples of the final legislation.}

*In this example, the discounted rate would have been 58.9p (the wholesale price of 80.0p minus the government baseline wholesale price of 21.1p). But this is higher than the maximum discount that is allowed under the scheme, so a discount of 34.5p is applied. 

This means that the higher your rates, the higher your bills will be, even once the discount has been applied. 

How did the Energy Bill Relief Scheme affect your business?  

The lower your contracted rates, the lower your discounted bills would have been during the scheme. 

The Energy Bill Relief Scheme limited the price that suppliers pay for wholesale electricity to 21p per kWh and 7.5p per kWh for gas. Your rate was then cut to this amount, subject to a ‘maximum discount’ of 34.5p per kWh for electricity and 9.1p per kWh for gas. 

The scheme was designed to give all businesses a discount on their energy bills for six months. But the size of this discount depended upon the rates you were paying and the type of contract you were on. 

• High out-of-contract rates - If you’re paying 130p per kWh for electricity and the wholesale costs account for 80p per kWh, your bill could be discounted to 90p per kWh. As in the example above, this is where the maximum discount comes into play. And it's worth noting that if wholesale prices go up, you’ll pay more. But if wholesale prices go down, you won’t necessarily pay less. 
• Medium fixed contract rates - If you pay 90p per kWh for electricity and the wholesale costs account for 60p per kWh, your bill could be discounted to 51p per kWh for the next six months. 
• Low fixed contract rates - If you pay 60p per kWh for electricity and the wholesale costs account for 40p per kWh, your bill could be discounted to 41p per kWh for the next six months. 

If you’re out of contract, suppliers can increase your rates at any time. This left businesses vulnerable to price increases, even while the scheme is running. 

This is why the government worked with energy suppliers to make sure all business customers in England, Scotland and Wales have the chance to switch to a fixed contract while the scheme is running.  

To compare fixed-rate business energy contracts, give Bionic a call now on 0800 084 1830. 

If you want to know how the scheme will affect businesses in different sectors, the number-crunchers at Bionic have taken the examples from this government guidance page and broken the rates down into kWh.

How could the Energy Bill Relief Scheme have affected the business energy rates of a pub?

Let's say a pub signed a fixed contract in August 2022 and currently uses 4,000 kWh of electricity and 16,000 kWh of gas each month. Their contracted unit rates are currently 90p per kWh for electricity and 25p per kWh for gas. 

Here's how the discount will affect its rates for the next six months.

How could the Energy Bill Relief Scheme have affected the business energy rates of a school?

A school signed a fixed contract in July 2022. It currently uses 10,000 kWh of electricity and 22,000 kWh of gas each month. Their contracted unit rates are currently 60p per kWh for electricity and 17.5p per kWh for gas. 

Here's how the discount will affect its rates for the next six months.

How could the Energy Bill Relief Scheme have affected the business energy rates of a manufacturing business?

A manufacturing business signed a fixed contract in August 2022. It currently uses 200,000 kWh of electricity and 16,000 kWh of gas each month. Their contracted unit rates are currently 102.9p per kWh for electricity and 25.7p per kWh for gas. 

Here's how the discount will affect its rates for the next six months.

How could the Energy Bill Relief Scheme have affected the business energy rates of a hospital?

A hospital signed a fixed contract in June 2022. It currently uses 2,000,000 kWh of electricity and 7,900,000 kWh of gas each month. Their contracted unit rates are currently 102.9p per kWh for electricity and 25.7p per kWh for gas. 

Here's how the discount will affect their rates for the next six months.

What businesses were eligible for the Energy Bill Relief Scheme? 

The Energy Bill Relief Scheme was applied to all non-domestic contracts. This means it was open to all businesses, including voluntary and public sector organisations. 

There were some exceptions, such as power stations, grid-level battery storage facilities, or any business that uses gas or electricity to generate power that will be sold back to the grid. 

The only other condition was that all eligible businesses are on one of the following contracts: 

• An existing fixed price contract that was agreed on or after December 1, 2021. This includes contracts signed while the scheme is running. 
• Deemed rates, out-of-contract rates, or a variable tariff 
• Flexible purchase or a similar contract 

Check out our guide for more information on the available types of business energy contract. 

What is the business energy price cap?

There is no price cap on business energy rates. Instead, the government has introduced the Energy Bills Discount Scheme. This will give businesses discounted energy rates for 12 months from April 1, 2023.  

The complexity of commercial energy contracts and the difference in usage between businesses means that a cap on business energy rates would have been difficult to put into practice. 

The difference in how and when businesses use energy can be huge. Although a fish and chip shop and a car manufacturing plant both need electricity to function, the way in which they use this power is completely different. This is why there are no ‘off-the-shelf’ options for businesses and contracts need to be tailored to meet the needs of each individual business.   

And this complexity makes it more difficult to impose one blanket rate across all businesses. 

The Energy Bills Discount Scheme is designed to reflect the complexity of commercial energy contracts and offer financial support to businesses of all sizes. 

What are the latest rates?

For more detailed information on the latest rates head to our business energy page.

Energy price cap FAQs

If you're still not 100% sure what support is available to you or have more questions about the price cap, find out in our frequently asked questions. 

What is an energy price cap?

An energy price cap limits the amount that suppliers can charge for a unit of energy. It also usually caps the amount of the standing charge. Although price caps are often measured in the cost of an annual energy spend, this is just an average figure and you should always check the capped unit rate. 

The Energy Price Guarantee, for example, was often cited as capping household energy at £2,500 a year, but this figure is based on an average household paying by Direct Debit. The actual capped rates were 34.00p per unit of electricity rates at 10.30p per unit of gas rates at 10.30p per kWh. Standing charges were also capped at 46.35p for electricity and 28.49p for gas. This means that bills were higher or lower than the quoted £2,500 depending on energy usage and payment methods (paying by Direct Debit is usually the cheapest option). 

The government support schemes help businesses, but they are no energy price caps, like we see in domestic energy. Instead, the government are reducing the amount that suppliers have to pay for wholesale power and suppliers must pass this discount on to businesses, by law, as a discount on bills. 

Is there small business energy price cap? 

There is no price cap on business energy rates, no matter the size of your business. Microbusinesses, small businesses and medium to large businesses don’t get the benefit of a price cap, unlike domestic contracts. There is only the government discount outlined above, which is not an actual price cap, but a discount on energy rates. 

How was the government discount be applied?

The government provided a discount to your unit rates based on the difference between the wholesale cost and the “government-supported price” at the point of signing the contract. The credit was automatically applied to a bill each month. This scheme has now ended and no further government support has been announced.

What did this mean for my bill? Can you give me a rough percentage of credit against my full bill?

If you're on a fixed contract, the amount of discount depends on the rates agreed upon when you signed up. Any contracts signed on or after December 1, 2021, are eligible. You can find out how much discount you will get by downloading a document from the government website. Any discount will be applied to your November bills, and then for the duration of the six-month scheme. Whichever supplier you go with will apply the discount automatically.

If you're on a variable deal, you'll be eligible for a maximum discount of 9.10p per unit of gas and 34.50p per unit of electricity.

Why am I paying more than 21.1p per kWh for electricity and 7.5p per kWh for gas?

This was not a price cap, it was a discount. Energy contract prices are made up of two main bits: 

1. The wholesale price, which is the amount the supplier has to pay generators for power
2. Charge and supplier profit

The government is reducing the amount that suppliers have to pay for wholesale power, down to 21.1p per kWh. This was discounted from the wholesale cost on your unit rate. You still need to pay the other elements that make up your bill.

If my business is in a fixed contract lower than the price cap, what happens?

Your contract will continue, and you'll pay your bills at the agreed contracted rates.

Will the suppliers re-bill my business if we have previously paid a higher rate than the price cap?

The scheme applies during the six-month period between October 2022 and April 2023. This means that the government will apply the discount on your bills within that period. But it doesn't apply retrospectively to previous bills before that period.

Where can I find more information on this scheme?

All available information on the Energy Bill Relief Scheme (EBRS) can be found on the UK government website. While customer support will be delivered by non-domestic suppliers including SSE Energy Solutions, this scheme is being administered by the government and all current information is available on government channels.

Will green levies be removed from my bills?

Yes, the reductions in bills in this scheme include the removal of green levies. Some non-domestic customers' bills may still show green levies being charged, but in all cases, this charge will be covered by the EBRS discount for eligible energy use.

What happens if I can’t pay even my discounted business energy bills?

If you're struggling to pay your business energy bills, then you should contact your supplier as soon as possible. Under Ofgem rules, the supplier must offer a reasonably affordable payment plan. You can find out more in our guide to business energy bills.