What help can small businesses get with their energy bills?

Energy suppliers are stepping up support for small businesses trapped in sky-high energy contracts even as the price of wholesale gas falls.

British Gas and Octopus have have introduced ‘blend and extend’ contracts, following calls from the Federation of Small Businesses to cut tariffs for struggling firms who fixed at the market peak last summer.

Businesses that fixed their bills between 1 July and 31 December 2022 were quoted £1 per kWh for electricity, according to the lobby group.

Blend and extend: British Gas will allow customers to reduce bills following calls from the FSB

Small businesses have been among the biggest victims of the cost of living crisis, and firms in the food and retail sector have been particularly badly hit.

The FSB says a significant proportion of businesses stuck in extortionate fixed contracts are in hospitality.

We’ve compiled a list of some of the support on offer and what to do if you’re struggling to pay your bills.

What support does the Government currently offer?

When higher prices first started to filter through to customers, businesses were largely left without support, before the introduction of the Energy Bill Relief Scheme.

However, this has since come to an end, once again leaving small firms struggling to pay their bills.

The less generous Energy Bills Discount Scheme, which launched on 1 April, offers businesses a discount on the unit price of gas and electricity and is available to those on fixed-price contracts that were agreed on or after 1 December 2021, as well as deemed and out-of-contract rates.

Rather than a flat rate, the amount businesses will pay when the discount is applied will completely depend on the rates they’re currently paying to their supplier.

We’ve explained how this works below.

What do businesses pay under the Energy Bills Discount Scheme? 

Rather than a flat rate, the amount businesses will pay when the discount is applied will completely depend on the rates they’re currently paying to their supplier.

The maximum discount for gas is around 0.7p per kilowatt hour, subject to a threshold rate of 10.7p per kWh, while the maximum discount for electricity is around 2p with a threshold rate of 30.2p per kWh.

The threshold rate is the lowest amount you can be discounted to under the scheme. This means:

  • If you’re paying 32.2p per kWh of electricity you’ll receive the full 2p discount and pay 30.2p per kWh under EBDR, according to Bionic.
  • If you pay 31.2p per kWh you’ll only get a 1p discount to take you to the 30.2p discount.

If you pay 33.2p per kWh of electricity you’ll get the full 2p discount but still be paying over the threshold. Standing charges aren’t affected by the scheme.

The Government claims a pub which uses 16MWh of gas and 4MWh of electricity each month could save up to £2,280 this year.

Large business energy users like those in mining and manufacturing will be eligible for a further discount.

‘Energy Trade Intensive Industries’ will get 4p off the difference between the wholesale unit rate they pay to their supplier, and the threshold rate of 9.9p per kWh.

The maximum discount for electricity will be 8.9p with a price threshold of 18.5p per kWh.

What support are suppliers offering struggling firms?

Given the lack of substantial Government support, energy suppliers have been forced to step up to help customers on the brink.

The FSB specifically called on suppliers to allow firms to extend their fixed contracts at a blended and lower rate, between the original fixed rate and the current, lower wholesale rate.

This would be offered to businesses which negotiated a new contract between 1 July and 31 December 2022.

This week, British Gas announced it would offer ‘blend and extend contracts’ to businesses on higher rates, to help spread costs over a longer period.

The company said it would help ‘some businesses with the opportunity to extend their existing contract term by 12 months’.

British Gas said it would be looking, at the very least, those who fixed between 1 July and 31 December 2022, but it’s those on higher rates who stand to benefit the most.

Dave Fishwick

Eligible businesses will be contacted in the coming months.

Tina McKenzie, the FSB’s policy chair said: ‘Allowing small businesses to come out from the energy contracts they fixed during market peak last year is vital to their survival. 

‘British Gas is doing the right thing to adopt our call and give small businesses the option to ‘blend and extend’.

‘We hope this is made available to all small business customers who are trapped in fixed tariffs from last year’s peak period. Now is the time for other energy suppliers to follow suit.’

Octopus Energy and SSE also told This Is Money they had ‘blend and extend contracts’ in place for business customers too.

An Octopus Energy spokesperson said: ‘We monitor wholesale prices and if there are reductions we pass on these savings to customers by bringing our tariffs down even further. This meant last month alone, we were able to lower our variable business tariff price by 40 per cent.

‘Business customers on a fixed tariff from last year can also already benefit from decreased wholesale prices through ‘blend and extend’ tariffs which we offer. This means we can bring their prices down immediately.’

British Gas is providing energy grants to some business customers, and has said it will prioritise pubs, cafes, restaurants, hairdressers, shopkeepers and charities

British Gas is providing energy grants to some business customers, and has said it will prioritise pubs, cafes, restaurants, hairdressers, shopkeepers and charities

Octopus said it had been offering the contracts for a few weeks.  

A spokesperson for SSE said: ‘We have recently taken the step to extend payment terms for those businesses struggling with the impact of fixing long-term contracts at the peak of commodity prices last summer.’

British Gas has also announced £15million worth of grants to to help with energy costs, which may go some way in helping firms.

However, if this was shared between its 350,000 business customers, it would pay out less than £43 per firm.

British Gas has said it will primarily provide the grants to pubs, cafes, restaurants, hairdressers, shopkeepers and charities, but other eligibility criteria is unclear.

What to do if you’re struggling to pay your bills

If it’s becoming increasingly difficult to pay your business’s bills, the first thing you should do is speak to your supplier.

It’s important to act quickly because your energy supply could be disconnected if you don’t make arrangements with your supplier to deal with the debt.

The majority of suppliers are accommodating when it comes to settling payments. Octopus Energy said it offered tailored support options for its customers, including payment plans and payment holidays.

SSE also said it had ‘actively taken measures’ to help small firms and had already extended payment terms.

If you’re a ‘microbusiness’, you can only be billed for energy you’ve used in the last 12 months, according to Citizens Advice. If you think you’ve been overcharged, make sure you call your supplier and complain.

You might also consider making your business more energy efficient, but this will depend on having enough cash to pay for outgoings like energy efficient light bulbs and insulation. 

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