It will cover energy usage from October 1 to March 31, with the relief being applied to bills automatically.
The government has set a “supported wholesale price” which is expected to be £211 per megawatt hour (mwh) for electricity and £75 per mwh for gas.
The Department for Business, Energy and Industrial Strategy says that this is less than half the wholesale prices it anticipates this winter, which look set to be in the range of £600 per mwh for electricity and £180 for gas.
The Association of School and College Leaders (ASCL) has welcomed the move, including confirmation of how much schools can expect to pay. However, they would like the six-month period to be extended as soon as possible in order to help schools plan ahead financially.
The scheme is currently slated to run for six months but will be reviewed after three months “to inform decision on future support after March 2023”.
It applies to all non-domestic customers, including all UK businesses, the voluntary sector and charities, and the public sector including schools and hospitals. The government confirmed that:
- Non-domestic customers on existing fixed price contracts will be eligible for support as long as the contract was agreed on or after April 1, 2022.
- Those on default, deemed or variable tariffs will receive a per-unit discount on energy costs, up to a maximum of the difference between the supported price and the average expected wholesale price over the period of the scheme. The amount of this “maximum discount” is likely to be around £405/mwh for electricity and £115/mwh for gas, “subject to wholesale market developments”.
- For those on flexible purchase contracts – typically some of the largest energy-users – the level of reduction offered will be calculated by suppliers according to the specifics of each contract and will also be subject to the “maximum discount”.
In announcing the scheme, the government cited an example of how it will work:
A school uses 10 mwh of electricity and 22 mwh of gas a month. They signed a fixed contract in July 2022, giving them a current monthly energy bill of about £10,000. At the time they signed their contact, wholesale prices for the next six months were expected to be higher than the supported price of £211/mwh for electricity, and £75/mwh for gas, meaning they can receive support under this scheme. The difference between expected wholesale prices when they signed their contract and the Government Supported Price is worth £240/mwh for electricity and £70/mwh for gas, meaning they receive a discount of £4,000 per month, reducing their original bill by 40%.
Commenting on the announcement, Geoff Barton, ASCL general secretary, said: “This move was essential as schools and colleges were facing absolutely massive hikes in energy costs which were simply unaffordable and would have caused an immediate financial meltdown in the sector. We will now be looking at the scheme in detail and asking for feedback from school and college leaders.
“The glaring problem is the fact that the scheme is time-limited to six months. The government says it will review the operation of the scheme in three months’ time to inform decisions on future support after March 2023. However, 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.”
Mr Barton also reminded ministers of the other elephant in the school budget – the unfunded teacher pay rises.
The awards amount to 8.9% for new teachers this year, tapering down to and 5% for more experienced teachers (M6 and upwards) as well as for school leaders.
Mr Barton added: “The pay awards are fully deserved and needed – and in fact do not go far enough – but the government’s expectation that this will be paid for out of existing budgets that are already very tight is completely unrealistic and unsustainable. The government must improve the funding settlement for schools and colleges.”
Last week SecEd published an analysis of the funding pressures facing schools and the fact that school funding is forecast to be 3% lower in real-terms in 2024/25 than it was in 2010.