Following Liz Truss’ initial energy support announcement on 08 September 2022, the government has now given further detail on how support will be provided.
***UPDATED 1 NOVEMBER 2022
Any intermediary in England, Wales, Scotland that will or has been provided support from the Energy Price Guarantee (EPG), Energy Bills Support Scheme (EBSS), or Energy Bill Relief Scheme (EBRS) must ensure they are passing this support on, in a just and reasonable way, to end users.
This may include but is not limited to:
- student accommodation managers
- social housing providers
- local authorities (for council housing)
- site owners (for park homes)
- site managers
- marinas if using shore power (for boat homes)
- combined heat and power operators
- electric vehicle charging operators
- other residential building managers
The pass-through benefit must be passed on as soon as reasonably practicable. To the extent that scheme benefits have not been passed on when the underlying scheme ends, the expectation is that they will still be passed on in accordance with the pass-through requirements.
The pass-through benefit must be provided via the following methods, as set out in the pass-through Regulations.
- application of a credit in the next invoice, statement of account or similar document provided by the relevant intermediary to the end user
- a payment in cash or by any other means, including a bank transfer
- tariff adjustment on tariff equipment
- adjusting the amount of money taken pursuant to a direct debit or the amount of a standing order
- set off against an amount or part of an amount which was owed by the end user to the relevant intermediary at the time at which the scheme benefit was provided to the relevant intermediary
- or a combination of the methods set out above
For more information on the pass through requirements, see the Government page here - https://www.gov.uk/government/publications/pass-through-requirements-for-energy-price-support-provided-to-intermediaries/guidance-on-the-pass-through-requirements-for-energy-price-support-in-great-britain-provided-to-intermediaries
A 6-month wholesale energy price cap will now be in place from 01 October 2022 to provide support to all non-domestic energy customers. From 01 October 2022 to 31 March 2023, the wholesale energy price will be capped at £211 per MWh (21.1p/kWh) for electricity and £75 per MWh (7.5p/kWh) for gas. However, the cap price per kWh will not cover the whole rate you pay for the cost of your energy.
Wholesale energy costs only make up around 40% of the end p/kWh unit rate. Additional charges will still be added to your unit rates as they are in the current way, and these are not affected by the price cap.
How do customers get a contract with capped rates if they have already signed?
Customers who signed after
01 April 2022 *01 December 2021 (scheme was expanded on 10 October 2022) will receive equivalent support on their bills between 01 October 2022 and 31 March 2023. The government has published some information detailing how it will be supporting the suppliers by publishing a discount rate against the wholesale price for the contract all contracts were signed to assist suppliers with their calculations. Depending on when your contract was signed, you may find that you’re already below the capped rate by catching the market on a good day, so no reduction may be necessary. We will communicate with any customers impacted by this that we have arranged contracts for when we know more. The government have advised that anybody due a discount based on the capped rate will have this automatically applied on their bills for October’s consumption, which will usually be produced in early November if you’re billed monthly.
How do customers get a new contract with capped rates if they haven’t already renewed?
The government support will cover only 01 October 2022 to 31 March 2023 so any contract you now agree will automatically have this applied to that period by the suppliers. We still recommend shopping around and comparing offers when they become available again, as standing charges and supplier margins will still vary and there may still be savings to be made, especially to ensure that once the initial 6-month cap has ended, the rates in the remainder of the contract are as fair as possible.
What about businesses that aren’t in fixed price contracts?
For businesses on variable rates within this period or who hedge their energy via flexibly traded contracts, the scheme will work a little differently. A maximum discount of £345/MWh (34.5p/kWh) for electricity and £91/MWh (9.1p/kWh) for gas has now been confirmed by the government, which will be applied to the final rate for the month on the invoice for the supported period. This will allow a discount down to, but not below, the government support price but does not necessarily guarantee the same wholesale rate that fixed businesses would get if the starting rate was high. This will depend on the variable rate you’re on or the flex rate you have hedged and bills for the month with the applied discount.
If you’re on a variable/deemed rate then check that the discount will bring you as close to the supported rate of 21.1p/kWh as possible and also keep an eye out for the suppliers plans to increase them within the supported period, as it could result in paying more. If you have the option to fix, this could potentially help you to benefit fully from the supported period, giving you budget certainty.
If you’re in a flex contract, it’s worth reviewing your hedging strategy, if you have one, to decide whether you may benefit from hedging more than you may have initially planned within the supported period, to try and benefit as much as possible from the cap.
Will there be further support after 6 months?
This support is only for 6 months with further announcements about eligibility of what constitutes ‘vulnerable’ sectors yet to come out. The only suggestion so far has been supporting the hospitality sector, but with no written confirmation.
Are there any exclusions?
So far, the government has announced that the scheme is intended to have a broad application but there may be exclusions. Examples given so far include businesses that use gas or electricity to generate or store power that they are selling back into the grid, such as power stations, pumped hydro or grid-level battery storage. As we know more on this, we will communicate with any individual customers who may be impacted.
Can customers still use the NFU Energy brokering service?
Suppliers have always priced on the same wholesale market (give or take some differences based on how they hedge and hold their prices) and the prices you can get from one to the next could still differ greatly. With only the wholesale market price being capped, we believe it will still be essential to compare offers to ensure the supplier margins and standing charges are fair and to ensure that you’re getting the best rate and advice for your business.
We’re still digesting the announcement, what it means and how it impacts our customers so we can offer the best advice we can to those affected. We don’t yet have the detail from our network of suppliers who are also busy processing how these changes will be implemented for customers.
Even though variable and out of contract rates are covered by this support, the government are recommending that customers sign fixed term contracts to benefit fully and avoid further costs.
We will release further information once we have contract prices available again so NFU Energy can support you with this.