Business Energy

What is the Energy Bills Discount Scheme?

The Energy Bills Discount Scheme (EBDS) is a government programme to help businesses struggling with high energy bills. It replaced the Energy Bill Relief Scheme on April 1, 2023 and will run for 12 months.

The scheme offers a discount on the unit rates of fixed-price contracts, signed on or after December 1, 2021, as well as on deemed, out-of-contract, and other flexible contracts. But if your rates are lower than the minimum threshold, you won’t get the discount (more on that later).

How does the Energy Bills Discount Scheme work?

The Energy Bills Discount Scheme offers a discount on the wholesale price of your unit rates, so long they’re above the minimum threshold. Here’s how it works for most businesses:

• Gas – A maximum of £0.00697 (about 0.7p per kWh) off the difference between the wholesale element of the unit rate you pay to your business gas supplier and the price threshold of 10.70p per kWh.
  
• Electricity - £0.01961 (about 2.0p per kWh) off the difference between the wholesale element of the unit rate you pay to your business electricity supplier and the price threshold of 30.20p per kWh.

The lowest rate you can be discounted to is 10.70p per kWh of gas and 30.20p per kWh of electricity. If your business is already paying this amount or less, it won't get a discount.

If you are eligible, you won’t need to apply for a discount as your energy supplier will take care of it. But it’s worth checking your bills to make sure it’s been applied properly. If not, get in touch with your supplier.

If your business is in the Energy Trade Intensive Industry category, this means you use a lot more energy than most other businesses. It includes industries like mining and manufacturing. To find out if you’re in this category, there's a helpful list on the government website. If you are one of these businesses, the scheme will work like this:

• Gas – 4.0p off the difference between the wholesale element of the unit rate you pay to your supplier and the price threshold of 9.9p per kWh.
  
• Electricity – 8.9p off the difference between the wholesale element of the unit rate you pay to your supplier and the price threshold of 18.5p per kWh.
  
• These are maximum discount rates and will only apply to 70% of energy volumes, which means you'll pay full rates for the remaining 30% of the energy you use.

If your business is classed under the Energy Trade Intensive Industries category though, you will need to apply for your discount. Check the government website for more information.

How does the Energy Bills Discount Scheme differ from the Energy Price Guarantee?

Although the government has launched a number of different schemes to help businesses and households with high energy bills, there’s still some confusion over who qualifies for certain schemes. Here’s a breakdown of the different schemes you need to be aware of:

Non-domestic energy contracts

• Energy Bill Relief Scheme – The government’s original support scheme for businesses. This ran for six months between October 1, 2023, and March 31, 2024.
• Energy Bills Discount Scheme – A support scheme aimed at non-domestic energy users that replaces the Energy Bill Relief Scheme. EBDS will discount unit rates on eligible business gas and electricity contracts from now until March 31, 2024.

Domestic energy contracts

• Energy price cap – Introduced in 2019, this capped the amount that suppliers could charge households for their energy. There is currently no planned end date for the price cap.
• Energy Price Guarantee – The energy price cap wasn’t enough to keep prices down during the energy price crisis, so the government introduced a supplementary scheme to subsidise the amount supplier paid for wholesale energy. These savings were then passed on to households. The scheme is set to run until June 2023.
• Energy Bill Support Scheme - Aimed at domestic energy users, this offered £400 as a monthly discount to every eligible customer and ran between October 2022 and March 2023.

As a business energy user, the important thing to remember is that there is no price cap on business energy. That’s why it still makes sense to compare fixed rate energy deals to get the cheapest possible rates.

What if your contracted business energy rates are below the minimum threshold?

It’s important to check that your rates are above the threshold to take advantage of the savings. You won’t be eligible for the full discount if the rates you're currently paying are below the minimum threshold.

The discount you receive will depend on how much higher your rates are over the threshold. Plus, the discount will only be applied when the wholesale part of your unit rate is higher than the government threshold rate (this rate is 10.7p per kWh of gas and 30.2p per kWh of electricity).

As an example, if the wholesale part of your electricity unit rate is 31.2p per kWh hour, you’ll only be offered a 1p discount because you will have reached the threshold before the full 2p discount can take effect.

But if your electricity unit rate is 32.2p per kWh or more, then you’ll be eligible for the full 2p discount.

Will the Energy Bills Discount Scheme save your business money?

It depends, if you meet the minimum threshold, then yes, your business could save money on energy bills. Unfortunately, you won’t make as much of a saving compared to the Energy Bill Relief Scheme. This is because government funding has been cut by a significant amount.

Funding for the Energy Bill Relief Scheme was around £18 billion from October 1, 2022 until March 31, 2023. But funding for the Energy Bills Discount Scheme will be capped at £5.5 billion from April 1, 2023, to March 31, 2024. The below table shows how EBDS could affect gas and energy costs.

Are energy prices coming down?

It’s difficult to say, as the energy market is still turbulent. The price you pay for business energy should be lower over the next few months whilst the Energy Bill Discount Scheme runs as long as you meet the threshold requirements.

But you might not be reaping the benefit if you’re on out of contract rates. The government is recommending you switch to a fixed rate deal to protect against future price rises, so it’s its wise to have a look round and see if you can do this.

How to cut your business energy bills

Although the government is providing help in the form of the Energy Bill Discount Scheme, you can also try to take proactive steps to reduce your energy consumption to save further.

Try to use less energy overall, only heat rooms which are being used, turn monitors off when you’re not using them and consider energy saving light bulbs or lighting that only automatically come on when the room is entered. It helps to cut your energy consumption down where you can.

If you’re on out-of-contract, deemed, or any other variable rates, it’s also worth comparing business energy quotes to see if you can lock in cheaper rates with a fixed term deal. Speak to our business energy switching partners at Bionic for a free no-obligation quote today.