Written by: Eelinn Vanquaethem, Marketing & Content Manager

To help non-domestic customers, the Department for Business, Energy & Industrial Strategy (BEIS) announced a discount to be applied to energy usage between 1^st October 2022 and 31^st March 2023. Paired with multiple new regulations and bills to help domestic energy users, there are now multiple ways to help UK residents through the energy crisis.

However, unlike most domestic residents in the UK, those on heat networks do not currently benefit from the energy price guarantee, currently capping bills at £2,500 annually.

With price caps in place for wholesale gas and electricity supply, it is imperative that these savings are not only passed onto domestic heat network residents but also communicated effectively.

Contents

Why is the cost of gas increasing?

What is the Energy Bill Relief Scheme?

What does this mean for me as a heat supplier?

Is there any additional support available to my residents to help them pay for their energy bills?

Why is the cost of gas increasing?

Clients currently undergoing renewals of their gas contracts will have noticed that wholesale prices have risen, with British Gas reporting an increase of 335% in the last 12 months.

According to Ofgem, the UK’s gas storage levels are historically low with our neighbouring European countries facing similar issues. This is a result of recent political and economic turmoil. Following Russia’s invasion of Ukraine, many countries are reducing their reliance on Russian gas as part of other sanctions imposed on the country. Additionally, the previous winter has been extremely long and cold, and other UK energy sources are struggling to generate energy, there is a shortage of supply resulting in increased prices.

What is the Energy Bill Relief Scheme?

On 21^st September 2022, BEIS announced the Energy Bill Relief Scheme (EBRS) for non-domestic customers, with additional updates made in October 2022.

As it stands wholesale energy prices are to be fixed for all non-domestic energy customers at 21.1p/kWh for electricity and 7.5p/kWh for gas. This will remain fixed for six months starting from 1^st October 2022.

Figure 1: The wholesale price cap for electricity and gas runs from 1st October 2022 until 31st March 2023 (source: BEIS)

All whose energy derives from a commercial contract, including tenants who pay their landlord who purchases their energy via a commercial contract, will benefit. This means that heat suppliers must pass on their cost savings to their heat network residents.

The price cap applies to all commercial energy contracts agreed upon on or after 1st December 2021 and includes any new business energy contracts signed after 1^st October 2022. Only those with energy rates exceeding the capped limit will benefit.

What does this mean for me as a heat supplier?

Before the announcement of the EBRS, fuel procurement prices were typically already calculated into heat tariffs. As it is now a legal requirement for any cost savings made from the wholesale energy price cap to be passed onto heat network residents, their tariffs are set to change starting from 1^st October 2022:

• Residents on default, deemed, or variable tariffs will receive a per-unit discount on energy costs, up to a maximum of the difference between the supported price and the average expected wholesale price throughout the EBRS.
• Non-domestic customers on default or variable tariffs will pay reduced bills, but these may still change over time and be subject to price increases.
• For businesses on flexible purchase contracts, the level of reduction offered will be calculated by the energy suppliers according to the specifics of that company's energy contract. It will also be subject to the maximum discount.

It is important that you, as a heat supplier, confirm the new unit charge rate for heat network residents with or without EBRS pass-on. 

The heat supplier has a legal requirement to send a separate letter to residents that shows how the wholesale price cap under the EBRS has been calculated and applied to their heat tariffs. 

Insite Energy provides template letters to be sent to your residents. Please download the relevant letter below:

• Pass-through letter for heat providers to inform the heat network consumer that energy supplier rates have been confirmed AND cost savings have been applied to the unit rate
• Pass-through letter for heat providers to inform the heat network consumer that energy supplier rates could not be confirmed AND a reduction, reflecting the average savings seen across a range of suppliers, has been applied to the unit rate
• Pass-through letter for heat providers to inform the heat network consumer that energy supplier rates could not be confirmed AND the unit rate could not be recalculated at this point

If your metering & billing is provided by Insite Energy, please contact your account manager to discuss how any wholesale price changes can be calculated and communicated to your residents.

Is there any additional support available to my residents to help them pay for their energy bills?

To help soften the blow for domestic energy customers, the then Chancellor of the Exchequer, Rishi Sunak, unveiled a £21bn package to help Britons with the cost-of-living crisis in May 2022.

This plan, also known as the Energy Bills Support Scheme (EBSS), includes a £400 discount on energy bills for all UK households, and a £650 one-off payment to more than eight million low-income households.

The credit residents are eligible for depends on their household’s situation.

Figure 2: The energy grant available to you depends on your household's situation. (source: HM Government)

The majority of households will receive a one-off payment of £400. This amount will be applied to domestic electricity bills in six instalments over six months starting from October 2022. If their electricity is on a prepayment system, this amount will either be applied to their meter, or they will be issued with a voucher through the post.

Additional financial support will be provided to low-income households on means-tested benefits, persons on disability benefits, and pensioners. A full list of available support with energy bills can be found on Gov.uk.

More information on the EBSS and how the credit will be paid to your residents is available in our energy rebate blog post. We highly recommend you share this with your heat network residents.