With rising energy bills putting restaurants, pubs, cafes, and bars under huge pressure through autumn and into winter, the government is introducing a business energy bills plan to alleviate some of the financial strain. Here, now, an explanation of that plan, and what it means for businesses in the U.K,
How is the government cutting energy bills for businesses?
The Energy Bill Relief Scheme, which will run from October 2022 to March 2023, provides price reductions on electricity and gas for non-domestic customers. The government will set a “government supported price” for both electricity and gas.
Do restaurants, pubs, cafes, and bars need to sign up to the energy relief scheme?
No: it is an automatic discount that suppliers must apply. However, the mechanisms for the scheme remain undecided, so support for October bills is likely to be backdated, being received on November bills.
Which businesses are eligible for the energy bill relief scheme?
Every business is eligible, including those on fixed price contracts, whether existing since April 2022 or new, and those on variable tariffs.
What is the size of the energy bill discount?
The “government supported price” for electricity will be £211 per megawatt hour (MWh); it will be £75 per MWh for gas. This, the government says, represents a 50 percent discount on what it calls “recent wholesale costs in England, Scotland, and Ireland,” but this is an estimate of what prices were expected to reach in winter.
How will this discount reduce a typical energy bill?
For a pub that signed a contract in August 2022 and uses four megawatts per hour of electricity and 16 megawatts per hour of gas, the difference between expected wholesale prices and the government supported price is worth £380 per megawatt hour for electricity and £100 per megawatt hour for gas, meaning they receive a discount of £3,100 per month, reducing the bill by more than 40 percent, according to Propel.
Meanwhile, a restaurant that uses around 3.5 megawatts per hour of electricity and four megawatts per hour of gas each month that is on a variable contract would receive the currently estimated maximum discount of £405 per megawatt hour for electricity and £115 per megawatt hour for gas. This would reduce a monthly bill by half.
Is the government-backed energy price exactly what businesses will pay on their bills?
No. There will be other costs in the final price of energy for the next six months, owing to network and supplier charges that will vary.
How will Jeremy Hunt replacing Kwasi Kwarteng as Chancellor affect the energy bill support plan?
Hunt has said that the scheme will be reviewed from April onwards, as was previously planned. There will be no change to the terms of the support.
What does this mean for restaurants, pubs, cafes, and bars?
As with government support during the COVID-19 pandemic, it’s a mixture. The scale of the cuts — and the establishing of a fixed price, rather than a proportional discount — will protect businesses which were facing astronomical rises in contract costs. Their timing is already too late for some, who were forced to close by the prospect of rising energy costs moreso than even having to pay them.
The wording of the review for “vulnerable” businesses will also cause both hope and consternation. It is likely that over winter restaurants — and particularly pubs — will remain at risk, not from bills then, as they will be discounted until spring 2023, but from the bills that may follow that six month period. It would be a great shame if they were kept afloat during the hardest months, only for the purported time of recovery to be what sent them under.
That fixed price protection also doesn’t change the fact that going from a very very high price to a very high price still puts longer term financial pressure on restaurants, pubs, cafes, and bars. The reduction may stave off immediate crisis, but time will tell if it is sufficient.