Energy bills discount scheme: what businesses need to know

The Energy Bills Discount Scheme (EBDS) is designed to provide a level of security and certainty, and some protection from the ups and downs of a volatile market.  

So how will the EBDS work and when can you start to feel the benefits? 

What is the Energy Bills Discount Scheme? 

Announced in January 2023 and launching from 1 April, the EBDS replaces the government’s Energy Bill Relief Scheme.

In a similar way, it has been created to provide a discount on wholesale gas and electricity prices for business consumers.

The scheme has a cap set at £5.5 billion and will run for 12 months. The main difference from the previous initiative is that each business will enjoy a discount on wholesale prices, rather than just a cap on costs. 

Who will get the Energy Bills Discount Scheme?

This scheme is aimed at those on a non-domestic contract, which essentially means businesses, charities and public sector organisations like schools and hospitals.

To qualify, these organisations must be: 

• On a fixed price contract agreed after December 1 2021
• Signing a new fixed price contract
• On a deemed contract, or out of contract
• On a standard variable tariff
• On a flexible purchase or similar contract 

How much does the scheme offer?

You get a ‘per-unit’ discount, which is subject to a maximum amount.

The discount is applied when wholesale prices go above a certain threshold, as shown here: 

• For electricity, a discount of up to £19.61 per megawatt hour (MWh) when wholesale price rises above £302 per MWh
• For gas, a discount of up to £6.97 per MWh, when the wholesale price rises above £107 per MWh 

If prices don’t go above these thresholds, the EBDS won’t be applied. 

How do you get the discount?

It couldn’t be easier. Your supplier will automatically provide the discount if the prices rise above the ‘trigger point’.

The government then compensates your supplier for the reduction in cost that they are offering you. 

Here are a couple of examples to illustrate the process: 

• You’re a small shop, using 2MWh of gas and 1MWh of electricity every month. With the EBDS, you could receive up to £403 during the next financial year
• You’re a typical SME, or medium-sized manufacturer, using a far greater 1,600MWh of gas and 200MWh of electricity each month. EBDS will see you compensated with up to £687,120 between 2023 and 2024 

What about very high energy users?

There will be an extra level of support available for energy intensive users, classified as Energy and Trade Intensive Industries (ETIIs).

Here are the figures: 

• For electricity, a discount of £89 per MWh with a threshold of £185 per MWh
• For gas, a discount of £40 per MWh with a threshold of £99 per MWh 

ETII customers will need to apply for the higher level of support. Details of this are yet to be announced. 

Substantial support for serious times 

The EBDS strikes a balance between supporting businesses during the next 12 months while attempting to limit taxpayers’ exposure to uncertain energy markets.

It’s all about providing confidence and stability for organisations facing operational challenges and financial pressure from all sides.