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Support Solutions UK

27b Harmire Enterprise Park, Barnard Castle, DL12 8BN

Tel: 01325 487080 – Mob: 07968 142394

Contact us now to discuss your requirements

    Support Solutions UK

    27b Harmire Enterprise Park, Barnard Castle, DL12 8BN

    Tel: 01325 487080 – Mob: 07968 142394

    January 2023

    Briefing

     

    The Energy Crisis and the Support Mechanisms that the Government have in place to help people and businesses

    Here at Support Solutions UK, we like to keep our followers and clients up to date with latest industry news.  Our January briefing takes a look at the Energy Crisis and the Support Mechanisms that the Government have in place to help people and businesses.

    The Current Situation

    Energy markets began to tighten in 2021 because of a variety of factors, including the extraordinarily rapid economic rebound following the pandemic but the situation escalated dramatically into a full-blown global energy crisis following Russia’s invasion of Ukraine in February 2022.

    The price of natural gas reached record highs, and as a result so did electricity in some markets. Oil prices hit their highest level since 2008.

    Higher energy prices have contributed to painfully high inflation, pushed families into poverty, forced some factories to curtail output or even shut down, and slowed economic growth to the point that some countries are heading towards severe recession.

    Europe, whose gas supply is uniquely vulnerable because of its historic reliance on Russia, could face gas rationing this winter, while many emerging economies are seeing sharply higher energy import bills and fuel shortages.

    On the 8th September 2022, the government announced a significant support package to help with energy costs this winter to try and assist with extortionate energy costs.

    This support package freezes the annual bill for a typical household at £2,500. It is estimated that this will save the average household about £1,000 per year compared to what they would have spent on a tariff at the maximum October price cap (£3,459)

    The government and energy suppliers have a number of different schemes to help customers pay for energy. We will now take a look at these:

    The governments Energy Price Guarantee

    Freezing tariffs at £2,500 per year for the typical home, the Government has put an Energy Price Guarantee in place to protect customers from high wholesale energy costs. It caps energy unit prices for most customers so that a typical home shouldn’t pay more than around £2,500.

    Variable Tariff

    There are maximum rates that customers can be charged on a variable tariff for a 6 month period. For the typical home, the energy price guarantee caps prices at around 34p per unit of electricity and 10.3p per unit of gas.

    Note – It is important to note that there are slight variations on what you pay depending on where you live and your method of payment

    Fixed Tariff

    In terms of fixed tariffs, the energy price guarantee will be a discount on your tariff unit rates by around 17.8p per unit of electricity and around 4.4p per unit of gas

    Note – many customers will have different fixed tariffs depending on when they locked their rates in. The amount of discount that you get depends on your tariff. If you are on a fixed tariff that is cheaper than what is quoted above you will not get any further discount

    Prepay Customers

    If your on a prepayment meter, the Energy Price Guarantee will be applied to the rate you pay for each unit of energy, so the money you put on the meter will last longer than it would have otherwise.

    Many customers have queried whether or not the £2,500 figure is the maximum that they can pay for their energy. Here is the answer.

    The Energy Price Guarantee affects unit rates, so the protection that you receive is relative to how much energy you use. If you use more-or-less energy than a typical home, your own yearly energy costs on a tariff priced at the maximum rates maybe higher – or lower – than the £2,500 figure which is based on the yearly usage of a typical medium consumption home that uses around 2900 kWh of electricity and 12000 kWh of gas per year

    Note – by setting up a Direct Debit many suppliers tend to give you a discount of around £80 per year so this is something to consider to save you some money

     

    Domestic Customers – Special government help during the Energy Crisis

     

    The government have announced several ways that they plan on helping people during the energy crisis. A list of help available is detailed below:

     

    £400 Energy Bill Support Scheme for Every Household

     

    This is delivered in six monthly instalments starting from October 2022 through until March 2023

     

    £150 Council Tax rebate

     

    People who live in houses that are in council tax band A-D should have already received £10 directly to their bank account

     

    £650 for people who receive Government Benefits

     

    People who are entitled to certain benefits or tax credits will get £650. It will be sent to your bank account in two payments the first being in July 2022 and the second being in October 2022.

    The eligible government benefits for this payment include:

     

    Universal Credit

    Income Base Job Seekers Allowance

    Income Based Employment and Support Allowance

    Income Support

    Working Tax Credit

    Child Tax Credit

    Pension Credit

     

    £300 for Pensioners

     

    Pensioners who are eligible to receive Winter Fuel Payment this winter will receive an additional £300 as a Cost of Living Payment

     

    £150 in cost of living Payments for people with Disabilities

     

    People on certain types of benefits will have an extra £150 paid into their bank accounts this winter. Those eligible for this include:

     

    Disability Living Allowance

    Personal Independence Payment

    Armed Forces Independence Payment

    Attendance Allowance

    Constant Attendance Allowance

    Scottish Disability Benefits

    War Pension Mobility Supplement

     

    Regular Yearly Government Support

     

    In addition to the special government help, there is ongoing support available from the government that is given to people who need help paying for their energy. This ongoing support includes:

     

    £250-£600 Winter Fuel Payment

     

    This is for pensioners who:

     

    Get Pension Credit

    Were born before 25th September 1956 – please note that theuy must have been in the UK for at least one day between the 19th-25th Sept 2022 (known as qualifying week)

     

    It is also available for people on:

     

    Income based Jobseekers allowance

    Income-related Employment and Support Allowance

    Income Support

     

    Note – the amount you receive depends on your circumstances and it should be received no later than 13th Jan 2023

     

    £25 per day Cold Weather Payment

     

    If the average temperature where you live is below freezing (zero degrees) or is forecasted to be below freezing for 7 days you can claim this if:

     

    You are a pensioner on pension credit

    Claiming Universal Credit

    Claiming Income based Job Seekers Allowance

    Claiming Income related Employment and Support Allowance

    Claiming Income Support

    Claiming Support for Mortgage Interest

     

    Note – this will be paid straight into your bank account by no later than 31st March 2023

     

    £150 Warm Home Discount (England and Wales only)

     

    If you are a pensioner and live in England or Wales and are on means tested benefits, living in houses with high energy costs you can claim this.

     

    A means tested benefit is one where the money, and whether you can have it, are based on how much money you make and already have.

     

    People on the following benefits can claim this:

     

    Universal Credit

    Income based Job Seekers Allowance

    Income related Employment and Support Allowance

    Income Support

    Housing Benefit

    Pensions Credit Savings Credit

    Child Tax Credits

    Working Tax Credits

     

    Note – prepayment customers will be given vouchers and they should be received by March 2023

     

    Help for Businesses and Non-Domestic Customers

    Around 14 months ago, the government announced the Energy Bill Relief Scheme (EBRS). This scheme is available to everyone on a non-domestic contract including:

    • businesses
    • voluntary sector organisations, such as charities
    • public sector organisations such as schools, hospitals and care homes

    who are:

    • 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)

    If you’re not connected to the gas grid the government announced that it would provide a fixed payment of £150 to all UK non-domestic consumers who are off the gas grid and use alternative fuels, with additional ‘top-up’ payments for large users of heating oil based on actual usage.

    Exclusions

    These schemes are intended to be of broad application but there are limited exclusions. These include:

    • where gas and/or electricity is not supplied via a licenced supplier
    • gas or electricity used to generate electricity to be sold to the grid, including where this has been stored first (under battery or pumped storage)
    • any gas or electricity to be used to provide heating, cooling, hot water or electricity for end users in the Republic of Ireland (Northern Ireland scheme only)

    Some large energy users may protect themselves from exposure to wholesale price changes by ‘hedging’ in the energy or financial markets. In these circumstances, their overall exposure to wholesale prices may end up being greater or less than the Reference Wholesale Price reflected in relation to the Supply Contract. If certain criteria are met, the level of EBRS support provided would be amended by their energy supplier to account for this.

    The scheme is intended to provide relief on energy bills. Non-domestic suppliers and consumers must not profit from the scheme other than for its intended purpose. Any abuse of scheme arrangements could result in:

    Bill Reduction

    The government announced that it would provide a discount on your gas and electricity unit prices. To calculate your discount, the estimated wholesale portion of the unit price you would be paying would be compared to a baseline ‘government supported price’ which is lower than currently expected wholesale prices for the winter months.

    For all non-domestic energy users in Great Britain and Northern Ireland this government supported price was set at:

    • Electricity – £211 per megawatt hour (MWh) / 21.1p per kilowatt hour (KWh)
    • Gas – £75 per MWh / 7.5p per KWh

    For comparison, when the scheme was announced, wholesale costs in England, Scotland and Wales for the winter months were expected to be around:

    • Electricity – £600 per MWh / 60p per KWh
    • Gas – £180 per MWh / 18p per KWh

    To ensure a level of support comparable to the domestic scheme and consistency between the domestic and non-domestic schemes, the government supported price is based on the implied wholesale element of the Energy Price Guarantee. However, the final per unit price paid by non-domestic customers would differ as it would reflect other costs such as network charges and operating costs, plus the impact of competition between suppliers.

    The Energy Bill Relief Scheme is not subject to a price cap review, unlike the Ofgem price cap for the domestic market and the approach taken by the Energy Price Guarantee.

    Applying the reduction – How it Works

    Suppliers were asked to automatically apply reductions to the bills of all eligible non-domestic customers. Customers did not need to apply for their discount.

    If you think your supplier has not applied the discount correctly, you should contact your supplier in the first instance.

    The government announced it would compensate suppliers for the reduction in wholesale gas and electricity unit prices that they are passing on to non-domestic customers.

    The discount applied will be in pence per kilowatt hour (p/kWh). The p/kWh government support for comparable contracts will be the same across suppliers, but the absolute level of individual bills would continue to vary across different contracts and tariffs.

    Suppliers are required to ensure that where discounts are being applied under the scheme, they are subject to a minimum supply price set at the government supported price for gas and electricity.

    Fixed contracts

    For fixed contracts the discount would reflect the difference between the government supported price and the relevant wholesale reference price for the day the contract was agreed.

    Customers who signed their fixed rate contract before 1 December 2021 will not have been exposed to volatile wholesale prices, so would not have been eligible for support under the scheme

    Variable, deemed and all other contracts

    For variable, deemed and all other contracts, the discount would reflect the difference between the government supported price and relevant wholesale price, but be subject to a ‘maximum discount’:

    • Electricity – £345 per MWh
    • Gas – £91 per MWh

    Businesses on variable / flexible contracts would need to choose whether they move to fixed contracts. This was likely to suit businesses who didn’t want to be exposed to price variation.

    The p/kWh government support for comparable contracts would be the same across suppliers, but the absolute level of individual bills would continue to vary.

    Out of contract and deemed tariffs

    For out of contract and deemed tariffs, the regulations set out the following process for suppliers to apply the discounts to customers.

    A supplier must apply both:

    1. a) the relevant wholesale price discount and
    2. b) the discount for qualifying financially disadvantaged customers (QFDCs), if applicable, as set out in Part 5 of the EBRS GB Regulationsand the EBRS NI Regulations.

    Part 5 of the Regulations makes separate provision for suppliers to provide an additional discount for certain QFDCs. The aim is to mitigate the financial disadvantage experienced by QFDCs in obtaining an affordable supply of energy. This may be, for example, due to their poor credit rating or because of their high energy usage.

    For more information on how this applies to QFDCs, see:

    Flexible Price contracts

    For flexible price contracts, the relevant wholesale reference price is the contracted wholesale price on a volume-weighted average basis for that period, according to Regulation 11 of the EBRS GB Regulations and EBRS NI Regulations.

    Third party intermediaries (TPIs) and energy brokers

    Third party intermediaries (TPIs) and energy brokers have no influence over the per unit cost reductions that will have been applied to energy costs under the scheme. You did not have to take out a new contract or change your contract for appropriate reductions to automatically be applied to your bills.

    Intermediaries

    Any intermediary in England, Wales, Scotland or Northern Ireland, that had  been provided with EBRS support, should have passed this support on, in a just and reasonable way, to end users such as customers of heat networks and park home residents..

     

    Example in Practice

    The level of support for each organisation should have varied depending on type and date of contract. Take for example a hospital

    A hospital uses around 2,000 MWh of electricity and 7,900 MWh of gas each month. They are on a fixed contract that they signed in June 2022, giving them a current monthly energy bill of about £1.7 million. At the time they signed their contact, wholesale prices for the next 6 months were expected to be higher than the government supported price of £211/MWh for electricity, and £75/MWh for gas, meaning they could receive support under this scheme.

    The difference between expected wholesale prices when they signed their contract and the government supported price is worth £76/MWh for electricity and £27/MWh for gas, meaning they receive a discount of £370,000 per month, reducing their original bill by over 20%.

    Supplier obligations

    Suppliers should have been in contact with non-domestic customers to provide information about the implications of the scheme.

    For customers with supply contracts in force as of 27 October 2022 (fixed, flexible or variable), suppliers were required to determine the contract type and inform customers of this by 11 December 2022 (45 days after the 27 October 2022 when the scheme was introduced).

    If a customer disagreed with the classification of the contract, the customer should have notified the supplier within a reasonable time.

    For customers entering into a contract after 27 October 2022, suppliers were required to determine the contract type at the point when the contract is entered into or by 11 December (45 days after the 27 October 2022 when the scheme was introduced), whatever is the later date.

    Suppliers should have informed their customers of:

    • the amount of the discount
    • the discounted supply price
    • the amount by which its charges for supply in the billing period have been reduced by applying the discount or the basis on which that amount can be determined. For each subsequent billing period suppliers must inform their customers of the above within 15 days of issuing the customer invoice or statement of account.

    Review of the ERBS Scheme

    HM Treasury conducted a review into the operation of the scheme and decisions on continuing support were announced in December 2022.

    The review considered:

    • how effective the scheme has been in giving support to vulnerable non-domestic customers
    • which groups of non-domestic customers (by sector, size or geography) remain particularly vulnerable to energy price rises, taking into account the latest price position and forward curves, alongside other cost pressures
    • how to continue supporting these customers – either by extending the existing scheme for some users, or replacing with a different scheme

     

    EBRS legislation, rules and guidance

    The Energy Prices Act 2022 provided government with the powers to establish the EBRS, ensure scheme benefits are passed on to consumers, and provide for an effective compliance and enforcement regime. Subsequent regulations have been made under these powers.

    Support comparable to EBRS is being extended to non-domestic energy customers who receive gas or electricity via public networks from non-licensed providers. This small group was not covered by the EBRS legislation but will now be able to apply for non-standard EBRS payments from January 2023.

    Other support for business/non-domestic customers

    There is a range of ongoing schemes in place to support businesses with their energy costs. These include:

    • the Industrial Energy Transformation Fund (IETF), which supports manufacturers in England, Wales and Northern Ireland with high energy use to cut their energy bills and emissions by investing in energy efficiency and low-carbon technologies. Sites in Scotland can apply for grant support through the Scottish IETF

     

     

    • the UK Business Climate Hubwhich provides practical steps on cutting emissions and saving money. If businesses are based in England, they may also be able to access support via local Growth Hubs, who they can get in touch with to find out more

     

    The Future

    It was recognised that some businesses may continue to require support beyond March 2023, the overall scale of support the government can offer will be significantly lower and targeted at the most affected to ensure fiscal sustainability and value for money for the taxpayer.

    Continuing support to those deemed eligible would begin at the end of the initial 6-month support scheme, without a gap.

    It is important that users who are less vulnerable to energy price increases (particularly larger businesses that are not energy-intensive) use the 6 months support provided by the scheme to identify measures they can take to protect themselves against high energy prices.

    A package of targeted support over the next 5 years will support businesses as they transition to their new bills, protect businesses from the full impact of inflation, and support our high streets.

     

    On the 29th December 2022, the Government announced that support comparable to EBRS is being extended to non-domestic energy customers who receive gas or electricity via public networks from non-licensed providers

     

    References

     

    Energy Bill Relief Scheme: help for businesses and other non-domestic customers – GOV.UK (www.gov.uk)

     

    https://www.nea.org.uk/energy-crisis

     

     

    IF YOU WANT TO SUBSCRIBE TO OUR FUTURE BRIEFINGS PLEASE EMAIL LEE@SUPPORTSOLUTIONS.CO.UK AND WE WILL ADD YOU TO THE BRIEFING LIST.

     

    WE CURRENTLY HAVE CLOSE TO 900 PEOPLE THAT SIGN UP TO OUR MONTHLY BRIEFINGS

     

    ENJOY YOUR CHRISTMAS FESTIVITIES AND BEST WSHES FOR 2023

     

    WE WILL BE BACK IN JANUARY WITH ANOTHER BRIEFING

    THANKS FOR READING

    THE SUPPORT SOLUTIONS UK TEAM

     

     

     

    January 11, 2023 by Lee Hutton Categories:

    Latest Briefing

    Customer endorsement

    Social Rent –7% restriction on rent increases for social housing tenancies in 2023

     

    Here at Support Solutions UK, we like to keep our followers and clients up to date with latest industry news.  Our December briefing takes a look at Social Rent and the Regulator's recent decision to apply a 7% restriction on rent increases for social housing tenancies in 2023. Importantly supported housing is exempt from the 7% rent increase and can still apply CPI + 1%, which is 11.1% in total.

     

    What is Social Rent and how does it work?

    Around four million families live in the social rented sector. This is almost one-fifth of households in England. Social housing is provided by either housing associations (not-for-profit organisations that own, let, and manage rented housing) or the local council.

    As a social tenant, you rent your home from the housing association or council, who act as the landlord. Social housing aims to be more affordable than private renting and provide a more secure, long-term tenancy.

    Social homes are the only type of housing where rents are linked to local incomes, making these the most affordable homes in most areas across the country.

    Rents for social homes are significantly lower than private rents. Rent increases are also limited by the government, which means homes should stay affordable long-term so people aren’t priced out of their communities by rising rents.

    Social housing should be there for anyone who needs it. At present, the law states who is entitled to social housing and should get preference on the waiting list. But councils have lots of flexibility on who qualifies locally and social landlords can refuse to let to people if they so choose.

    People in social housing usually have secure tenancies, giving them greater protection from eviction and enhanced rights compared to those renting privately. They provide the foundation people need to get on in life, meaning families can put down roots, plan for the future and make their house a home.

     

    How is Social Rent set? 

    In 2019, the government set a rent policy for social housing that would permit rents to increase by up to CPI plus 1 percentage point (‘CPI+1%’) per annum, and made clear its intention to leave this policy in place until 2025. We are however living through exceptional times and when the current rent policy was set in 2019, inflation was forecast to be around 2% in 2022 and 2023.

    In July 2022, CPI was 10.1%. If CPI remained at or above this level in September, this would permit social housing rent increases from 1 April 2023 to 31 March 2024 of 11.1% or more. This is much higher than expected rate of inflation and is already placing considerable pressure on many households, including those living in social housing.

    Registered Providers of social housing (‘Registered Providers’) were obviously concerned about these pressures on their residents and came together on how the sector should respond.

    In the face of these exceptional challenges, the government thought that there was a strong case for making a temporary amendment to the CPI+1% policy for 2023/24 in order to provide a backstop of protection for social housing tenants from significant nominal-terms rent increases.

    The government decided to consult on a new Direction from the Secretary of State to the Regulator of Social Housing (‘the Regulator’) on social housing rents. This Direction would operate alongside the Direction on the Rent Standard 2019 issued on 26 February 2019 (‘the 2019 Direction’).

    The intention of this new Direction would require the Regulator to amend its Rent Standard so that the current CPI+1% limit on annual rent increases would be subject to a ceiling from 1 April 2023 to 31 March 2024. Registered Provider is allowed to implement. Registered Providers would be permitted to increase rents by 5% or CPI+1%, whichever is the lower. However, within this consultation, we are seeking views on 3%, 5% and 7% as ceiling options, and we are also

    7% Social Rent Cap 2023/24

    The Department for Levelling Up, Housing and Communities (DLUHC) had floated that social rent increases could be capped as low as 3%, however, setting the rent cap at 7% will come as a huge relief to registered providers and prevents a potentially apocalyptic scenario for some.

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