Starting from 1 April 2023, businesses will experience a reduction in financial support from the government under the new energy bill scheme.
The existing arrangements, which currently limit gas and electricity bills for businesses and provide government support when prices rise above a certain level, will be replaced by a discount on wholesale energy prices, with no cap.
This means that businesses will have to bear the full brunt of any price rises if wholesale prices continue to climb.
The discount, which is automatically applied to all eligible non-domestic customers with a licensed energy supplier, will be up to £6.97/MWh for gas and £19.61/MWh for electricity.
However, it is subject to a wholesale price threshold of £107/MWh for gas and £302/MWh for electricity, meaning that businesses with energy costs below this level will not receive any support.
The change was implemented by Chancellor Jeremy Hunt to replace the existing support package, which was deemed “unsustainably expensive.”
The new package of support will cost the government £5.5 billion per year, compared to the previous system which cost £18 billion over six months.
This change is expected to increase the operational costs of businesses, particularly those with high energy usage, and may further constrain their cash flow, restricting growth.
If you or your clients are struggling with their energy bills or general cash flow issues, we offer recovery and restructuring legal advice. Please contact us today for assistance.