Your guide to the energy price guarantee and equivalent business support
The government has announced a new energy price guarantee for domestic energy consumers, plus details of its financial support for businesses and its plans to legislate so landlords pass on the £400 energy grant payment to their tenants on bills-inclusive tenancies.
The government has announced details of the financial support that will be available to businesses in the face of rising energy bills, through the Energy Bill Relief Scheme - and shared that it will legislate to ensure landlords pass on the previously announced £400 energy payment to their tenants on inclusive tenancies.
This will sit alongside the new emergency legislation, that will supersede the domestic energy price cap, to ensure that energy bills are "affordable" through winter 2022/2023 and limited at around £2,500 a year for the average UK household from 1 October.
What new support has been announced for UK households?
A new energy price guarantee has been announced, meaning the typical household will pay £2,500 on average for the next two years from 1 October 2022, saving each £1,000 a year. Households that don't pay directly for their gas or electricity or aren't connected to the mains will receive support from a separate fund.
This is on top of the financial support already available for the winter months, as well as the previously announced £400 Energy Bills Support Scheme payment for all households, and the additional support available for vulnerable and low-income individuals.
You can read more about this financial support in our guide, to ensure your tenants understand what they may be able to access.
Will landlords need to pass on the previously announced £400 energy payment to their tenants?
The government has now announced that it will legislate to ensure that landlords pass the £400 Energy Bills Support Scheme (EBSS) payment on to their tenants, if the tenancy is on a bills-inclusive basis.
Chris Norris, the the National Residential Landlords Association's Policy Director, says: “Given payments under the support scheme have not begun to be made, the government’s plans to legislate are premature and are demonising landlords unnecessarily.
"It sends a dangerous and misleading message that landlords cannot be trusted to do the right thing, creating needless fear and anxiety for tenants."
How will the government help support businesses?
The government has revealed how it will support businesses during the cost of living crisis, with a discount on gas and electricity unit prices based on the energy price cap guarantee that domestic consumers will benefit from.
The government will set a "Supported Wholesale Price" at a rate of less than half the expected wholesale winter prices - £211 per MWh for electricity and £75 per MWh for gas.
The support will be automatically applied to bills, and the discount will apply between 1 October 2022 and 31 March 2023, with savings first seen in October bills.
The government will then conduct a review into the scheme in three months to determine how it will continue to assist the most vulnerable non-domestic energy customers past this date.
What level of discount will be available to businesses?
The level of discount will vary:
- Businesses on fixed-price contracts set up after 1 April 2022 will receive a reduction to the bring their energy costs in line with the new supported price, assuming they're currently paying a higher wholesale rate.
- Those on default, deemed, or variable tariffs will receive a discount on each unit of energy, with a maximum expected discount of £405/MWh for electricity and £115/MWh for gas. However, the government warns that these rates may still change over time and be subject to price increases.
- Suppliers of businesses on flexible purchase contracts will calculate the level of reduction, subject to the maximum discount, and "according to the specifics of that company’s contract".
How will the government pay for this new financial support?
Prime Minister Liz Truss announced a suspension of green levies, which will remove around £150 per household, and has shared plans to secure wholesale price for energy while putting in place long term measures to secure future supplies at more affordable rates.
However, no windfall tax will be announced, as Truss says that this would deter the future investment in the UK which is needed to secure home grown energy supplies.
How will the government aim to secure energy supply to keep prices affordable for households?
Truss announced a new Energy Supply Task Force, to help secure the energy supply in the UK to "address supply and affordability for the long term.
This task force will aim to:
- Negotiate long-term energy contracts with domestic and international gas suppliers
- Accelerate all sources of domestic energy, including ramping up North Sea production
- Introduce new oil licences, with 100 new licences to be awarded
- Speed up deployment of clean tech
The government has also announced that it will "back gas" to increase domestic energy supply. It will therefore end the moratorium on extracting shale gas, which could get gas flowing within 6 months.
It will also launch British Nuclear in September 2022, to ensure 25% of energy generation will be through nuclear power by 2050.
What resources are available to support my tenants or those struggling to pay their bills?
There are sites helping tenants to find ways to become more energy efficient in homes, and you can also ensure that they're aware of the financial support available, if they struggle to pay their energy bills, especially during the winter months.
If the increase in energy prices has an impact on your tenants' ability to pay rent, after advising them on the financial support available you should consider implementing a payment plan to tide the tenant over until the summer months when they will be using less energy.
For instances where mutually agreeing to a payment plan doesn't work, offering your landlords a rent protection option can help to give them peace of mind that they can continue to receive their income, even if their tenants are unfortunately unable to pay their rent.
Should my landlord still offer a "bills included" option?
If your landlords offer bills included but have not yet fixed their properties' energy prices, they may well find themselves trapped between the rising cost of gas, electricity in the house and their ability - or inability - to increase the rent to cover that.
Tenants may be willing to pay more with one packaged payment to ensure they have some certainty in their monthly expenditures.
You can help your landlords ensure they're appropriately balancing the costs that they're expected to pay with the money that they earn. There are providers out there who will fix the price for electricity - although those are now few and far between.
Is now the right time to make energy improvements?
Energy efficiency is already high on the government's agenda, with its Net Zero by 2050 target and the recent announcement of its strategy to move away from carbon-based forms of energy production, towards heat pumps and other solutions.
Proposals to increase minimum energy efficiency standards mean that landlords will need to invest to increase their Energy Performance Certificate ratings to minimum rating of C on all new and existing tenancies by 2028.
Energy efficiency improvements are both investment in your landlord's asset - the property - as well as the ongoing yield from rental payments, which will likely pay dividends when it comes to selling or continuing to rent in the future.
Taking a step by step approach will spread the cost of making these improvements.
How can I help my landlords manage their void periods during the energy crisis?
During the void period, you need to make sure that your agency and its landlords know who is paying the bills. Taking accurate metre readings is essential, so your landlord only pays for the energy they use.
This can also help avoid receiving bill estimates which assume the property is occupied and therefore more energy is being consumed.
Want the latest lettings new delivered straight to your inbox every week? Sign up to our mailing list and stay up to date.