It seems energy has been on the minds of everyone for a while, so perhaps it is worth us reviewing where we’ve been, where we are going and what you should consider doing next.
Starting with a cliché (sorry!) – the past year has been quite simply unprecedented. The Ukraine invasion sent the market spiralling out of control in February 2022 and for much of the six weeks that followed, trading was limited. Suppliers couldn’t predict the next day, let alone the year ahead.
Summer 2022 saw wholesale costs rocket to unfathomable highs, beyond a sustainable level for businesses.
Enter stage left – The Energy Bill Relief Scheme. Finally, intervention from our government, announced in September 2022 to take effect from Oct 2022 until the end of Mar 2023. Discount would be applied based on the WHOLESALE portion within your fuel on the week you signed.
New Year, new leaf
It certainly seems that way. Those all-important wholesale rates opened much lower. Warm weather across Europe helped as demand on gas loosened and a shift towards LNG as the continent looked to reduce dependency on Russia.
More good news
Sure. Why not! On the 9th January the government announced plans to extend the current relief scheme under a slightly different name Energy Bills Discount Scheme.
To cut to the chase, timescales and discount amounts were amended from the original conception.
According to Gov.uk the EBDS will run from April 2023 till end of March 2024.
What makes you eligible?
- Electricity: a maximum discount of £19.61/MWh and discounts being applied when the wholesale price goes above £302/MWh
- Gas: a maximum discount of £6.97/MWh and discounts being applied when the wholesale price goes above £107/MWh
I suspect MWh means very little to you. Rightly so, you’re a butcher… aren’t you?!
Megawatt Hour (MWh) is equal to 1,000 Kilowatt Hours (kWh) or better known as a single unit of electricity to the average Joe. Right now (W/C 6th February) the wholesale rate is at a mere £140MWh, some way below the minimum threshold as outlined above.
What does this actually mean?
In my view, the market finds itself in the best position for well over a year. Wholesale is as low as it has been since the invasion, unit rates are sharper and suppliers fighting for acquisitions.
However, this doesn’t mean we will be going back to the good ol’ prices of 15p for a unit of electricity. Far from it.
With wholesale costs nearly 50% below the minimum threshold (for discount eligibility), I would argue that there is little to no room for further regression. With all things considered, the cost of wholesale is likely to be as good as we can reasonably expect it to be. Therefore, the prices we are seeing right now from suppliers are in turn as good as they have been for near on 12 months.
Will I receive a discount?
This will seem peculiar, but you don’t want to receive a discount. Receiving relief from the scheme means you are either not fixed in a contract and are at the mercy of potentially volatile market
movements, or it could mean that your contract was fixed at a fairly high rate, and once the scheme inevitably ends, so will your discounted amount.
If you are in a fixed term contract, there is nothing that can be done to improve costs until the contracts runs its course. However, as the market continues to stabilise and with unit rates nearing a level the industry hasn’t seen in the last 12 months, now would be a good time to look to the future.
If you are not in a fixed term deal, you now have the opportunity to take advantage of a much more appealing market and secure a unit rate which not only is below your default charge, but voids the need for government aid.
How can I get the best rate?
Call me biased, but speak to the experts?!
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