The government has confirmed its plans to help schools and other non-domestic energy users with their energy bills this autumn.
Ministers say their plan to reduce rates to a “government-supported price” of £211 per megawatt hour for electricity and £75 for gas will equate to a saving of £4,000 for a school paying £10,000 a month for energy.
For comparison, the government said wholesale costs this winter are expected to be around £600 per megawatt hour for electricity and £180 for gas. School leaders had warned they faced “apocalyptic” bill hikes of as much as 500 per cent.
The Department for Business, Energy and Industrial Strategy said it would compensate energy suppliers for the reduction, which will initially apply to energy use between October 1 2022 and March 31 2023.
Prime minister Liz Truss said she understood the “huge pressure businesses, charities and public sector organisations are facing with their energy bills, which is why we are taking immediate action to support them over the winter and protect jobs and livelihoods”.
The discounts will apply to business and public sector organisations on existing fixed price contracts agreed on or after April 1.
They will also apply to those signing new fixed-price contracts, those on “deemed” or out of contract or variable tariffs, and those on flexible purchase or similar contracts.
For fixed contracts, the discount will reflect the difference between the government’s price and the “relevant” wholesale price for the day the contract was agreed.
For variable, deemed and other contracts, the discount will reflect the difference between the government’s price and wholesale price, but will be subject to a “maximum discount”.
BEIS said the amount of this maximum discount was “likely to be around £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments”.
Schools could save 40% on energy bills, says BEIS
The government said a school using 10 megawatt hours of electricity and 22 megawatt hours of gas a month would currently pay around £10,000 a month.
Because prices were higher than the government-set rates announced today when they signed their contract, they would receive support.
The difference between the two rates would be worth £240 per megawatt hour for electricity and £70 for gas, leading to a reduction in their monthly bill of £4,000, or 40 per cent.
The support will be “automatically applied to all eligible bills”, and schools “do not need to take action or apply to the scheme”.
Savings for energy used in October will be seen in October bills, which would usually be received in November.
Those who signed new contracts before April 1 “would not have been exposed to the recent rises in wholesale prices, so you will not be eligible for support under the scheme”.
More certainty needed, leaders warn
Geoff Barton, general secretary of the ASCL school leaders’ union, welcomed the details of the scheme, but warned the “glaring problem is the fact that the scheme is time-limited to six months”.
The government has said it will review the scheme in three months before making a decision about support beyond March 2023.
“This uncertainty makes it impossible for schools and colleges to plan financially with any degree of confidence because they could be knocked off course at a later date by steep rises to energy bills if government support drops off.
“School and college budgets are incredibly tight and any financial ill-wind is potentially devastating. We will be pressing the government for a firmer commitment to the sector.”
Leora Cruddas, chief executive of the Confederation of School Trusts, said support was “desperately needed”, but warned a six-month relief scheme “creates its own set of difficulties”.
“Schools and trusts need budget security over the whole financial year.”
And Paul Whiteman, from school leaders’ union NAHT, said he had “real concerns that this just doesn’t go far enough”, pointing out those who signed larger contracts before April will “slip through the cracks”.
“Even with this cap many schools will still find they are left facing much higher bills than budgeted for, which will necessitate extensive cuts to their educational offer.
“In a truly desperate situation, this plan is better than nothing, but unfortunately it doesn’t get close to solving the current funding crisis in schools.”
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