Energy prices have skyrocketed in recent months and we very much welcome the Government’s announcements, through the Energy Bill Relief Scheme. We have read through the details (and been in a number of meetings with the major energy suppliers on the subject) and just want to provide you with an overall summary and how this scheme will work in practice (although we are still receiving further updates).
In summary, the UK Government will provide a discount on WHOLESALE electricity and gas prices for ALL business customers. It will apply to fixed energy contracts agreed on or after the 1st April 2022, as well as to deemed, variable and flexible tariffs and contracts. This scheme will apply to energy usage from 1st October 2022 to 31st March 2023 and it will run for an initial 6 months’ period (to be reviewed in January 2023). As with the Energy Price Guarantee for domestic customers, customer do not need to take action or apply to the scheme to access the discounts. We believe the support (in the form of a pence per kWh discount) will automatically be applied to your invoices automatically (which we will obviously check and be aware of scams).
Last week’s wholesale costs were approximately 60 pence per kWh for electricity and 18 pence per kWh for gas (although this is changing on a daily basis). Under the Government’s wholesale price cap, these wholesale prices will be capped at 21.1 pence per kWh (electricity) and 7.5 pence per kWh (gas).
IMPORTANTLY, as this cap only applies to the WHOLESALE element of the contract, we can still make cost savings on your energy contracts and can tender your supplies, as normal (this is not the case for domestic supplies). From our experience, energy suppliers will be in contact about this change, but we would recommend to forward any correspondence you receive and we will tender your energy supplies as normal. Unlike the domestic market, the Government have preserved the function of the non-domestic energy market going forward. The Government advice is if you’re out of contract (or your contracts are coming up) to “set-up your contract as normal”, and we will ensure that you’re on the most competitive market rate. Obviously, we will be keeping a close eye on the market/developments.
As a working example, we believe the above mentioned scheme would work in the following way (using an electricity contract as an example, which has been simplified). Please note the figures below are for illustrative purposes only and based on our understanding after meetings with major UK energy suppliers:
- A company receives an electricity renewal quote for the period 1st November for 12 months
- The renewal quote is for 80 pence per kWh
- Beaconplus negotiate a new contract of 70 pence per kWh (saving 10 pence per kWh)
- After the wholesale discount is applied (35 pence per kWh in this example), the original renewal quote would be 45 p/kWh and the Beaconplus contract would be 35 p/kWh, saving 10 pence per kWh in total
- The Energy Bill Relief Scheme discount would apply to all usage from 1st October to 31 March 2023 (with this being reviewed in January 2023)
- The consensus opinion (at present) is that the wholesale discount will be shown as a separate line on the energy invoice. The exact discount will depend on the wholesale price at the time a new contract is secured (detailed of this are yet to be confirmed).
Please note, we have noticed a significant increase in calls from energy suppliers/brokers in terms of pushing energy contracts and we would always recommend doing a review, before anything is agreed (particularly in these times). Due to our large client base we have access to prices that our clients wouldn’t otherwise have access to.
Summary:
Unfortunately, we have seen a number of media reports over the past few weeks, which have suggested that business energy prices would be capped at the abovementioned prices (21.1 pence per kWh for electricity and 7.5 pence per kWh for gas), but this is only the wholesale element of the cost. We would be more than happy to discuss this further (as we realise the scheme is complex).
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Our performance related model means unless we are successful in making a saving, there is no cost for our services. We work with thousands of businesses across the UK, some of which will be local to you and help them with all aspects of their telecoms and utility arrangements (www.beaconplus.co.uk). You’re more than welcome to call on 01565 755600 or alternatively e-mail (lr@beaconplus.co.uk) for an individual and no-obligation review.
