Energy shakeup

By Charlie Rattigan

In its first significant policy shakeup of the new year, the government has announced the next phase of its programme of support on energy bills for businesses. The Treasury say the new Energy Bills Discount Scheme will provide a discount on high energy costs to give businesses certainty while limiting taxpayers’ exposure to volatile energy.

In a change up from the previous scheme, firms will now get a discount on wholesale prices rather than costs being capped. Additionally, firms will only benefit from the scheme when energy bills are high.

From 1 April 2023 to 31 March 2024, eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill, except for those benefitting from lower energy prices.

As the scheme provides larger discounts for big manufacturers, the announcement has been largely well received from heavy energy-using sectors such as glass and steel. However, the somewhat “one size fits all” model for the remaining sectors has been met with scepticism.

On twitter, the Federation of Small Businesses (FSB) stated it was “the beginning of the end for tens of thousands of small businesses”. FSB Chairman Martin McTague also noted that the existing scheme had provided “certainty for a business owner over their rates and has made a material difference to the survival of many small businesses”.

The British Chambers of Commerce also said that the new scheme falls "seriously short" for firms who are already struggling with price hikes.

Concerns have also been raised that the failing wholesale prices are not being passed down to certain sectors, notably in the hospitality sector. Clive Watson, chairman of the City Pub Group told the BBC that confidence will not return "until we see bills at the levels we saw them at last year,"

In response, speaking on the Today programme, Business secretary Grant Shapps confirmed that the government has written to OFGEM for a market review to make sure that its wholesale prices lead to lower prices for businesses as well, insisting that the government doesn’t want to see small businesses go under due to high energy prices. 

At a time when national debt stands at £2.48 trillion, it is clear the government are keen to scale back on costs after the unprecedented package of energy support through the winter. They are hoping the discount scheme will strike the balance between protecting national finances while also safeguarding sectors from energy price spikes.

Only time will tell whether the scheme change proves effective and the unpredictability of the war in Ukraine may force the government into adjusting the package in the near future.