Pubs to receive 'unprecedented' energy discount

21-Sep-2022 - Last updated on 22-Sep-2022 at 10:44 GMT

Unprecedented: Energy Relief Scheme announced to help cut businesses energy bills (Credit: Getty/bernie_photo)

Related tags Energy costs Finance Legislation ukhospitality

Pubs will receive an “unprecedented” energy discount under a new Government proposal outlined on Wednesday (21 September) by business secretary Jacob Rees-Mogg, as part of the Energy Bill Relief Scheme to help cut costs for businesses.

Working with suppliers to reduce the wholesale cost of gas, the scheme, for which fixed contracts agreed on or after 1 April 2022 as well as deemed, variable and flexible tariffs or contracts are eligible, will apply to energy usage from 1 October 2022 to 31 March 2023, running for an initial six-month period for all non-domestic energy users.

Rees-Mogg said: “We have seen an unprecedented rise in energy prices following Putin’s illegal war in Ukraine, which has affected consumers up and down the country and businesses of all sizes.

“The help we are already putting in place will save families money off their bills, and the Government’s plans for businesses, charities and public sector organisations will give them the equivalent level of support.

“This, alongside the measures we are taking to boost the amount of domestic energy we produce to improve both energy security and supply, will increase growth, protect jobs and support families with their cost of living this winter.”

According to an example given by the Government, a pub uses 4 MWh of electricity and 16 MWh of gas a month, having signed a fixed contract in August 2022, giving them a current monthly energy bill of about £7,000.

At the time they signed their contact, wholesale prices for the next six months were expected to be higher than the Government-supported price of £211/MWh for electricity, and £75/MWh for gas, meaning they can receive support under this scheme.

The difference between expected wholesale prices when they signed their contract and the Government-supported price is worth £380/MWh for electricity and £100/MWh for gas, meaning they receive a discount of £3,100 per month, reducing their bill by more than 40%.

Struggling to get your head around the discount? Fear not, we've created a handy business energy bill relief scheme calculator to help you estimate your bills.

Unprecedented and extremely appreciated

UKHospitality (UKH) CEO Kate Nicholls said: “We are relieved the Government has listened to the representations UKH has stridently delivered, relating to the problems the sector is experiencing with energy suppliers.

“This intervention is unprecedented and extremely appreciated as we head into an uncertain winter with numerous challenges on many fronts.

“The inclusiveness of the supports announced today – covering businesses small and large – will be extremely beneficial to the sector, [which] provides a huge number of jobs, many of which are now more secure.

“The Government, and the Prime Minister herself in her comments in New York yesterday (Tuesday 20 September), singled out the vulnerability energy costs are inflicting on the hospitality sector.”

As with the Energy Price Guarantee for households, businesses do not need to apply to the scheme to access the support because it will automatically be applied to bills, however, the level of price reduction for each business will vary depending on its contract type and circumstances.

Immediate survival

To administer support, the Government has set a Supported Wholesale Price, expected to be £211 per MWh for electricity and £75 per MWh for gas, a discounted rate for gas and electricity equivalent to the wholesale element of the Energy Price Guarantee for households.

It also includes the removal of green levies paid by non-domestic customers who receive support under the scheme.

Additionally, for customers not connected to either the gas or electricity grid, equivalent support will be provided for non-domestic consumers who use heating oil or alternative fuels instead of gas.

However, while this announcement has been well received by the sector, Nicholls stated a “more comprehensive” package was still needed to safeguard the industry.

She added: “This announcement will give businesses some confidence to plan for immediate survival but we will not relent in our pursuit of a more comprehensive package to safeguard businesses and jobs.

“The levers of reduced VAT and business rates reliefs are still available to the Government and there must also be a comprehensive package to ensure that there is no cliff edge when these measures fall away.”