Now that the UK government has released the full measures it is taking to mitigate consumer’s energy bills this winter, LGE has broken down these methods and what they mean for non-domestic users:
- The government has set a wholesale support price of £211/MWh (21.1p/kWh) for electricity and £75/MWh (7.5p/kWh) for gas.
- The support price functions as the minimum that the wholesale price can be discounted to. The maximum discount is the difference between the government supported price and a consumer’s relevant wholesale price, which will be £345/MWh for electricity and £91/MWh for gas.
- This is the wholesale price only and does not include the additional non-commodity charges such as network costs, balancing costs and environmental levies, that a consumer also must pay.
- These changes will affect contracts signed after 1st December 2021 and cover usage for six months from 1st October 2022.
- The government has said it will make further announcements for non-domestic users beyond March 2023.
How the scheme applies will depend on whether your business currently has a fixed, flexible or deemed energy supply contract.
- Users on existing flexible contracts will see the discount applied to their monthly weighted average price to a maximum of £345/MWh for electricity and £91/MWh for gas.
- This is the wholesale price only and does not include the additional non-commodity charges such as network costs, balancing costs and environmental levies that a consumer also must pay.
- On fully pass-through contracts, these will be at the governing bodies’ rates with no additional premium.
- Any new contracts will have their rates fixed at the wholesale support prices of £211/MWh (21.1p/kWh) for electricity and £75/MWh (7.5p/kWh) for gas.
- Those with existing contracts will see the wholesale price discount applied to their current rates at the full level, however suppliers can set their own risk premiums which may increase costs for some businesses that do not fall under the scheme.
- This is the wholesale price only and does not include the additional non-commodity charges such as network costs, balancing costs and environmental levies that a consumer also must also pay. These rates will be fixed with additional premium by suppliers including a level of risk.
- Users on deemed rates will have the maximum discount of £345/MWh for electricity and £91/MWh for gas applied to their current rates on the wholesale element only.
- Any additional risk factor will be factored in by the supplier, which is likely to mean higher costs than found on fixed contracts. These prices are classed as variable so attract the maximum discount levels.
How the Discount works
Pre October Wholesale Price: £420/MWh
Post October Wholesale Price: £211/MWh
The customer’s current wholesale price is within the maximum discount for electricity of £345/MWh and so their price is reduced to the wholesale support price of £211/MWh.
Pre October Wholesale Price: £572/MWh
Post October Wholesale Price £227/MWh
The customer’s wholesale is reduced by the maximum discount for electricity of £345/MWh but is still above the support price of £211/MWh.
The government’s full details and published rates can be found here. LGE will continue to update clients on any further government announcements. If you have any questions about how these changes might affect your business, please do not hesitate to contact your LGE Account Manager.