Should I Fix My Business Energy Bills until 2024?
Energy prices… It feels like that’s all we’re talking about at the minute, but there’s good reason for it. With rising costs and the anticipation that they’re going to increase even further, we want to give you the best advice possible so you don’t fall behind on your payments.
Small businesses are finding these price hikes harder to deal with than most, leaving them no choice but to be pinching the pennies.
What is the Energy Bill Relief Scheme?
The Energy Bill Relief Scheme is a discount that is provided on wholesale gas and electricity for non-domestic customers in the UK due to ongoing energy price volatility. Included are public sector organisations, charities and businesses.
The government’s relief scheme came in on 1st October 2022 to tackle the rising costs of energy and runs until 31st March 2023. With it coming to an end at the end of March, does this mean that there will be no more government support? Well, not quite. From April 2023, there will be a new scheme – The Energy Bills Discount Scheme.
Is the Energy Bill Relief Scheme only for businesses?
Yes, the scheme is only available to those on non-domestic energy contracts which includes:
- Voluntary sector organisations, such as charities
- Public sector organisations, such as schools, hospitals and care homes
However, this scheme will be replaced by a newer scheme, the ‘Energy Bills Discount Scheme’, designed to help businesses and non-domestic energy customers. This is due to start on April 1st.
What is the Energy Bills Discount Scheme?
This scheme, which is set to start on April 1st 2023, offers businesses a discount on their unit rates of gas and electricity. This means there is a discount on every unit you pay for, measured in kilowatt-hours.
Is the Energy Bills Discount Scheme only for businesses?
As with the original energy bill relief scheme, the new scheme will also only be available to those on a non-domestic energy contract including:
- Voluntary sector organisations, such as charities
- Public sector organisations such as schools, hospitals, and care homes
They will also need to be:
- On existing fixed price contracts that were agreed on or after 1 December 2021 signing new fixed price contracts
- On deemed / out of contract or standard variable tariffs
- On flexible purchase or similar contracts
- On variable ‘Day Ahead Index’ (DAI) tariffs (Northern Ireland scheme only)
What is energy price volatility?
Levels of supply can decrease and increase throughout the year. When demand for energy is higher than the amount available, it causes price fluctuations, and this is what causes the volatile changes in energy prices.
Why are energy prices so high?
There are a number of factors that have caused energy prices to rise:
Supply and demand issues
The main issue is that supply and demand issues are pushing up the costs of wholesale energy prices. This rise has meant that you, the customer, has had to fork out more to cover the cost.
With many industries and businesses closed due to the global Coronavirus pandemic, supply massively outweighed demand, and as the demand fell, so did the supply. As life became a little more normal, businesses began to reopen and demand began to outweigh supply, causing costs to increase.
War in Ukraine
The unexpected invasion of Ukraine by Russia caused energy prices to spike and this is still one of the key causes of our energy bills still being on the rise. The EU alongside other individual nations including the UK placed sanctions on Russian goods, which included gas and oil. Russian gas and oil accounted for around 14% of the world’s gas and an even bigger percentage for those in Europe. This caused the overall cost of gas to increase as other producers didn’t increase their supply, meaning prices rose. Another cause of the increase in gas was the closure of Nord Stream 1 (a network of offshore gas pipes which run under the Baltic sea from Russia into Germany). This closure caused prices to skyrocket, although since the closure, lots of European countries have cut their reliance on Russian gas.
Why are energy prices so high in the UK?
The rise in energy is high everywhere but why is it particularly higher in the UK than elsewhere? The UK has had the same issues as everyone else in the world but has also been met with its own issues:
Lack of government support
The UK government has been criticised throughout the entire energy crisis for not helping enough as it could have. The main issue is the most vulnerable within the UK are not receiving the help they need from the government. In neighbouring France they have capped electricity price increases to just 4% until the end of the year. Whereas in the UK, households have received just £400 in energy relief support over six months, which has failed to cover the estimated 80% rise in energy bills seen in 2022. Another major criticism of the government was the initial lack of support given to businesses. Initially support was only given to domestic customers which left businesses in a tough position with a lack of support that came a couple of months after the original domestic support.
Energy market issues
The way the UK energy market was originally set up means that when the wholesale prices of energy increased, smaller energy companies couldn’t cope. Sadly, when energy suppliers go bust it’s the consumer who has to foot the bill.
Will energy prices go down in 2024?
We aren’t in a position to predict the increase or decrease of your business energy bills for 2024. However with the current Energy Bill Relief Scheme being replaced by the Energy Bills Discount Scheme it’s likely that your bills will increase.
Should I fix my business energy prices until 2024?
When you go to sign your next contract you need to consider whether a variable or fixed rate is the right choice for your business. The likelihood is that energy costs, especially in the UK, will rise again. If that is the case then a fixed rate would be the go-to choice for most businesses. Fixing your contract will ensure that your rates stay as they currently are, and as energy costs have gone down more recently, it’s worth fixing your rate before they have the potential to rise later on in the year. You can find more information on fixed business energy deals here.
Ready to switch to a new business energy supplier?
If you’re a money savvy business looking to make some easy savings, get in touch. All you need is a recent business gas, electricity or water bill, then our team can handle the rest, providing you with all of the information that you need to make an informed decision.
Call our business energy experts today on 0800 464 0991 or fill in the form on this page to get started and learn more.