How the Government's new Energy Bill Relief Scheme will support beauty businesses
The Government’s business secretary, Jacob Rees-Mogg, has announced a scheme called the Energy Bill Relief Scheme to help with energy bills for businesses as the cost-of-living crisis continues.
This comes after beauty associations including the National Hair and Beauty Federation (NHBF) and the British Beauty Council called on new prime minister Liz Truss to introduce measures to support the beauty and spa industry.
The list of eligible businesses includes beauty salons which are:
- On existing fixed price contracts that were agreed on or after April 1, 2022
- Signing new fixed price contracts
- On deemed/out of contract or variable tariffs
- On flexible purchase or similar contracts
- A similar scheme is also due to be set up in Northern Ireland to provide a comparable level of support.
How does the Energy Bill Relief Scheme work?
The Government will compare what you are estimated to pay to your energy supplier against an amount they have set. The Government amount is called a baseline and is priced at less than what it is expected suppliers will pay for wholesale energy this winter.
The Government supported price has been set at:
- £211 per megawatt-hour (MWh) for electricity
- £75 per MWh for gas
This is less than the expected price from energy suppliers which is:
- £600 per MWh for electricity
- £180 per MWh for gas
However, the reduction only applies to the wholesale price of your energy, not your final cost. This is to keep it in line with the Energy Price Guarantee for domestic customers, i.e., your home energy bills. Your final per unit price could include network charges and operating costs, plus the impact of competition between suppliers. It will also change for different contracts and tariffs.
The discount will be based on the difference between the government-supported price and the wholesale price for the day that the fixed contract started. The Government will publish the wholesale prices and will use this for calculating for each day from April 1, 2022.
Variable, deemed, and all other contracts including those due to renew
The discount will reflect the difference between the Government supported price and relevant wholesale price but will be subject to a 'maximum discount' that will be determined at the beginning of the scheme.
If you are on a variable or flexible contract, you will need to choose if you want to move to a fixed contract. This is likely to suit you if you don't want your price to keep changing each month. Your supplier should be in touch to discuss this.
When will you receive the energy discount?
This will be applied automatically, and you will see the discount from your October bill – which you usually receive in November. You will continue to receive this benefit until March 31, 2023. The energy situation will then be reviewed.
Since the discount is automatic, messages relating to the scheme asking for your bank details could be a scam – you can report messages you think are suspicious.
For more tips on keeping you business’s data safe, check out how to safeguard your salon or spa.
What do you need to do?
Business owners do not need to do anything as the Government expects suppliers to contact them over the coming weeks to explain what will happen. The discount on wholesale energy is same for every supplier. However, the NHBF advised contacting your supplier to ensure that you will get the most benefit from this new scheme.
Energy brokers have no influence over the reductions that will be applied to wholesale energy costs under this scheme. You do not have to take out a new contract or change your contract for appropriate reductions to apply to your bills automatically.
How would this work in practice?
As an example, a small retail shop uses around 1 MWh of electricity and 2 MWh of gas each month. They are on a variable contract, giving them a current monthly energy bill of around £1,400 per month.
Because they are on a variable contract, they can receive support up to the Maximum Discount (currently estimated to be £405/MWh for electricity and £115/MWh for gas). Applying the Maximum Discount rates means that their monthly energy bill reduces by around 45%, leaving them with a bill of around £800 per month.
Richard Lambert, chief executive of the National Hair and Beauty Federation, said, "The energy support announced is a lifeline for many businesses in the hair and beauty sector that have battled through the last two years.
“The Government has listened, and we will be providing further evidence to make the case for hair and beauty as a 'vulnerable industry' needing support after the initial six-month period has ended."
Victoria Brownlie, chief policy officer at the British Beauty Council, added, “Many salons and businesses have seen their bills rise by up to 1,000 per cent before the upcoming cap. They are in an extremely vulnerable position even with a six-month cap in place.
“The personal care sector is a high-usage industry, regardless of season, with spas having to maintain operational temperatures, salons relying on hairdryers and hot water to operate and air conditioning units used as standard throughout the year.
“Our industry must retain this support post the announced six-month period, otherwise a sector that was showing its resilience and growth will be at real risk of decline.
"We must see further targeted support outlined in the upcoming fiscal statement such as the reintroduction of 100 per cent business rate relief for businesses most vulnerable, more attractive incentives for small businesses taking on apprentices and the extension of green grants to help businesses meet the UK’s net zero target."
Do you think the Government needs to do more to support the beauty and spa industries? Let us know in the comments…