Update: The government’s Energy Bills Discount Scheme (EBDS) ended on March 31, 2024. We’ve maintained this article in case the government decides to reopen the scheme in the future and will update the post accordingly.
What Is the Energy Business Discount Scheme?
The Energy Bills Discount Scheme (EBDS) was the UK government’s initiative aimed at helping businesses cope with rising energy costs. It replaced the Energy Bill Relief Scheme (EBRS) on April 1, 2023. However, it was not a price cap. Instead, it offered discounts on unit rates for businesses with fixed-price contracts signed from December 1, 2021, as well as for those on deemed or out-of-contract rates, provided they exceed a certain threshold. Energy-intensive sectors (typically businesses in sectors like manufacturing, mining, steel production, and chemicals) classified as Energy Trade Intensive Industries (ETII), received a larger discount due to their significant energy consumption, and the price threshold for these industries is lower than for others.
How did the EBDS Scheme work?
The EBDS scheme worked by offering discounted rates on gas and electricity, with the lowest rate you could receive to be 10.70p per kWH of gas and 30.20 per kWh on electricity. If you were already paying this or less then you were not able to receive the discount.
The EBDS discount was as follows:
- Gas: Up to £0.00697 (around 0.7p per kWh) off the difference between the wholesale cost of gas and a price threshold of 10.70p per kWh.
- Electricity: Up to £0.01961 (about 2.0p per kWh) off the difference between the wholesale electricity cost and a price threshold of 30.20p per kWh.
For Energy Trade Intensive Industries the savings were larger:
- Gas: 4.0p off the difference between the wholesale rate and a threshold of 9.9p per kWh.
- Electricity: 8.9p off the difference between the wholesale rate and a threshold of 18.5p per kWh.
These discounts only applied to 70% of the energy volume used, meaning businesses would have paid the full rate on the remaining 30%. Eligible businesses would automatically receive the discount from their energy suppliers, though Energy Trade Intensive Industries would have needed to apply for the higher-level discount.
While the EBDS offered some relief, it’s worth noting that the financial support under this scheme was significantly reduced compared to the EBRS (Energy Bill Relief Scheme). The total funding for the EBDS was capped at £5.5 billion for the year running from April 2023 to March 2024, while the previous scheme provided £18 billion in support over just six months.
What if Your Business Energy Rates Were Below the Minimum Threshold?
If your contracted business energy rates were below the minimum threshold set by the government, you wouldn’t have qualified for the Energy Bills Discount Scheme. The discount only applied when the wholesale portion of your unit rate exceeded the threshold mentioned above. If your rates were only slightly above the threshold, the discount may have been reduced. For instance, if your rate is 31.2p per kWh, you’d have received a 1p discount rather than the full 2p.
Should You Now Lock in a New Energy Deal?
Now that EBDS has ended, over a quarter of small businesses are facing monthly energy bills that are up to 40% higher than those from the previous year. With the energy market’s unpredictability, locking in a fixed-rate energy deal could be a smart move. Fixed rates provide stability by ensuring you pay the same amount throughout your contract. However, it’s crucial to compare energy suppliers to find competitive rates and avoid overpaying. Shopping around and reviewing your existing contract’s expiration date will help you avoid higher out-of-contract rates.
Why Is There No Replacement for the EBDS?
The government has not introduced any direct replacements of the EBDS with the main reasons being the stabilisation of wholesale energy prices since last year. Despite this, the energy market remains susceptible to fluctuations, and prices could rise again. It’s important for businesses to stay informed about market trends before entering new business energy contracts to avoid being locked into high-priced agreements without government support.
Strategies for Managing Energy Costs
In response to these challenges, businesses can seize the opportunity to reassess their energy usage and implement long-term cost-saving measures. Here are key steps to consider:
- Explore Competitive Energy Deals: Review your existing energy contract and research the market for better options. Fixed-term contracts might offer more stability amid market uncertainties.
- Enhance Energy Efficiency: Look for ways to reduce energy consumption. This could include turning off lights and equipment when not in use, investing in energy-efficient appliances, and improving insulation within your facilities.
- Adjust Your Budget for Potential Increases: Anticipate the possibility of higher energy expenses in the coming months. Revisit your financial plans to accommodate potential increases in energy costs.
By adopting a proactive and strategic approach, businesses can adapt to the new energy landscape, control their expenditures, and maintain financial stability despite the absence of government subsidies.
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