The Government has amended the maximum discount available to customers on flexible contracts and on deemed tariffs (out of contract) in response to its announcement regarding the Energy Bill Relief Scheme on September 21, 2022.
The following changes will be made to the initial forecasted maximum discount rates:
Electricity – £405 / MW (40.5p / kWh) reduced to £345 (34.5p / kWh)
Gas – £115 / MW (11.5p / kWh) reduced to £91 / MW (9.1p /kWh).
The originally published government support prices of £211 per megawatt hour MWh for electricity (21.1p per kWh) and £75 per MWh for gas (7.5p per kWh) are still valid.
We’re still waiting on the government to release information about the wholesale prices that any future discounts will be based on.
Your Account Manager here at ECA will be able discuss your individual circumstances in further detail.
Glossary of terms
Wholesale price – This represents the actual cost of the energy used (electricity and gas), which is traded as a commodity on the wholesale market. Non-energy costs will still be imposed in full despite the government support.
Non-Energy costs – These costs are necessary to pay for the system and network expenses incurred by maintaining the distribution and transmission network.
Government supported price – The government will provide a discount on your gas and electricity unit prices. The estimated wholesale portion of the unit price you would be paying this winter will be compared to a base “government supported price” that is less than what is currently anticipated to be wholesale prices this winter in order to determine your discount.
For all non-domestic energy users in Great Britain this government supported price has been set at:
• £211 per megawatt hour MWh for electricity (21.1p per kWh)
• £75 per MWh for gas (7.5p per kWh)
These prices may be subject to change.
Discount mechanisms – For fixed contracts, the discount will reflect the difference between the government-supported price and the relevant wholesale price on the day the contract was agreed.
For all other contracts, the discount will be the difference between the relevant wholesale price and the government-supported price, but it will be limited by a “maximum discount” that will be decided at the start of the scheme.
The government will publish the wholesale prices they will use for calculating this for each day from the 1st of April 2022, this was expected to be released by the 30th of September 2022.
Maximum discount – The maximum discount will be calculated by comparing the government supported price with the average of expected wholesale prices for delivery across the 6 months of the scheme. The government has confirmed these rates will now be £345 / MWh for electricity and £91 / MWh for gas, subject to wholesale market movement.
For clients on flexible / basket contracts, the price reduction will depend on the difference between the monthly weighted average baseload price (determined by your individual hedging approach) and the government supported price. In this case, the maximum support available per unit of energy will also be limited by the maximum discount.
If wholesale prices rise above the combined government supported price and maximum discount, then your prices will increase from the government supported price.
Out of contract rates – Often referred as deemed rates. If you are out of contract, then the supplier will charge you on these out of contract rates. They are subject to change at any time in line with market movement and the supplier has to publish these rates.
Currently these rates could be in the region of up to £1.50 per kWh electricity and 30p per kWh for gas.
For further details of the energy bill relief scheme please click the link below: