The government has confirmed its plans to help colleges, training providers 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 or college 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. College leaders had warned they faced four-fold bill hikes that threatened their insolvency.
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.
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” that will be “determined at the beginning of the scheme”.
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The government said a school or college 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 colleges “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”.
Geoff Barton, general secretary of the Association of School and College Leaders, 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.”
Jane Hickie, chief executive of the Association of Employment and Learning Providers, also said her members will be “seriously concerned about what happens after April if energy bills fail to return to their previous levels”.
“Rising costs, through energy bills and other pressures, are causing huge challenges within the skills sector that require immediate intervention,” she added.
David Hughes, chief executive of the Association of Colleges said: “This week’s energy bill relief announcement will protect many colleges from price rises for the next six months but government needs to make sure that this is not just a temporary reprieve.
“We need a long-term plan and support to make sure that colleges, who have already been battered by a decade of cuts and rising costs, aren’t forced into new financial difficulties when the current arrangements finish.”