Yesterday morning (21st September 2022), Business Secretary Jacob Rees-Mogg unveiled plans to support businesses facing rising energy bills, support growth, prevent unnecessary insolvencies and protect jobs for six months from 1st October 2022.
Wholesale Energy Costs will be capped at £211/MWh for electricity and £75/MWh for gas however, it is important to remember that Non-Commodity Third Party Costs will still be applied to your tariff.
It will apply to fixed contracts agreed on or after 1 December 2021.
Please be aware that much of the mainstream media are incorrectly reporting on this support package. As the price cap only applies to the Wholesale Commodity element, there are still many other costs which make up your total billable unit rate, such as network costs, green levies and third party costs.
NON-COMMODITY THIRD PARTY COSTS
Energy invoices are made up of a combination of the wholesale commodity cost (the fuel you consume, which has been capped by Government under the Energy Bill Relief Scheme) and non-commodity third party costs. Included in the non-commodity costs are government-originated charges and third party charges. Some of these charges are levied on suppliers who pass them onto the customer.
Your contract and/or bill may have these charges included in your overall agreed price; if so they won’t be shown on your invoice. Or you may have these items separated out, in which case they will be shown as separate line items on your invoice.
Examples of government originated charges are the Feed-in Tariff (FIT) and Electricity Market Reform (EMR) charges such as Contracts for Difference (CfD) and Capacity Mechanism (CM). Examples of third party charges include Distribution Use of System (DUoS), Balancing Services Use of System (BSUoS) and Transmission Network Use of System (TNUoS).
ELECTRICITY COST BREAKDOWN 2021/22
Under the Energy Bill Relief Scheme – even with the cap in place, a fully delivered business electricity rate could still easily exceed 30p/kWh — not capped at 21.1 p/kWh as is being reported by the media. While the discount to the wholesale element is generous, there are non-commodity costs to consider, which you can see in the cost breakdown above. All of these charges still need to be applied to your tariff after the discount has been applied.
Whilst details of the scheme are more clear in this announcement, this is huge tasks for energy suppliers to carry out.
If you’re unsure of what this means for your business and want to know what you can do to mitigate long term market volatility, contact us today.
Full details of the announcement below:
https://www.gov.uk/government/news/government-outlines-plans-to-help-cut-energy-bills-for-businesses
