New energy bills discount scheme will be ‘unsustainable for many’

energy support plan

The government has announced it is to cut back its support for businesses’ energy bills from April, leaving many hospitality companies even more vulnerable to rising costs, despite extending the support scheme until March 2024.

The scheme, which kicks in once the current one ends in March, will run until 31 March 2024 and will see firms receive a discount on wholesale prices rather than costs being capped as under the current one.

The new discount scheme will also have a cap set of £5.5bn, meaning a lower level of support.

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The government announced the new plans last night, saying it had provided an ‘unprecedented package’ of support through the winter, worth £18bn, but that it was ‘time-limited and intended as bridge’ to allow businesses to adapt.

Heavy energy-using sectors such as glass, ceramics and steelmakers will get a larger discount than others.

However firms will only benefit when energy costs reach a certain level.

Responding to the Chancellor announcing the Government’s new Energy Bills Discount Scheme, UKHospitality chief executive Kate Nicholls said: “While I’m relieved the Chancellor has listened to UKHospitality’s concerns and extended the scheme as a whole, the absence of a sector-specific package that helps vulnerable sectors like hospitality will still result in higher bills. Our analysis shows the new, lower level of support will see a total £4.5 billion hike in bills for the sector compared to the previous scheme.

“This will simply be unsustainable for many. With no further, dedicated support for a vulnerable sector like hospitality, I’d urge the Government to consider other measures it can take to help the sector. One measure in particular that would make a significant difference would be increasing the business rates relief cap. For those suppliers to hospitality in the wider food and drink sector that have received additional support, we expect them to support the sector accordingly in their pricing.”

From 1 April 2023 to 31 March 2024, all 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.

This will be subject to a wholesale price threshold, set with reference to the support provided for domestic consumers, of £107/MWh for gas and £302/MWh for electricity. This means that businesses experiencing energy costs below this level will not receive support.

Customers do not need to apply for their discount. As with the current scheme, suppliers will automatically apply reductions to the bills of all eligible non-domestic customers.

Nicholls adds: “Now we have some clarity on the future of energy support, we must see a concerted change in behaviour by energy suppliers, who have been unfairly treating businesses with outlandish quotes and unjustifiable demands for enormous deposits or pre-payments. Government must act swiftly if this is not forthcoming.

“This scheme is a significant investment from the Government and energy suppliers should not be using that as an excuse to hike up prices. The Ofgem review into the non-domestic market should serve as a wake-up call to suppliers that now is the time to be reasonable with the quotes they’re offering and to abandon unfair demands of businesses to secure fixed deals. They should also consider allowing businesses to renegotiate if they are stuck on previously agreed, inflated fixed deals.” 

Tags : costsenergyINDUSTRYUKHospiality
Zoe Monk

The author Zoe Monk

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