Policy paper

Energy Bills Discount Scheme: Energy and Trade Intensive Industry (ETII) guidance

Updated 31 January 2024

This was published under the 2022 to 2024 Sunak Conservative government

Guidance on Energy Bills Discount Scheme (EBDS) requirements for Energy and Trade Intensive Industries (ETIIs) and intermediaries in Great Britain and Northern Ireland.

Overview

Under the baseline EBDS support scheme the government is providing a discount on gas and electricity unit prices. Eligible non-domestic customers in Great Britain and Northern Ireland will receive a per-unit discount to their energy bills for energy consumed 01 April 2023 to 31 March 2024, subject to a maximum discount. Non-domestic customers operating primarily in sectors that have been identified as the most energy and trade intensive. ETIIs may receive a higher level of support. The relative discount will be applied if wholesale prices are above a certain price threshold.

The maximum discounts and price threshold for ETII sectors are:

• electricity - £89 per MWh with a price threshold of £185 per MWh
• gas - £40 per MWh with a price threshold of £99 per MWh

The higher discount will only apply to 70% of energy volumes. The remaining 30% attracts the baseline discount.

An ETII may be the direct customer of a licensed supplier, or an end-user who receives energy from a customer of the licensed supplier. In the latter case the ETII receives the benefit of the higher level of support as a passthrough, and the customer is an ‘intermediary’, as explained in this document.

For ETIIs that consume gas (natural gas or biomethane) or electricity supplied by wire or pipe from a license-exempt supplier, for which they pay a price that is pegged to wholesale energy prices, refer to the non-standard cases guidance document.

A separate Heat Network discount will provide a higher level of support to heat networks with domestic end consumers. In circumstances where eligible ETIIs are on an eligible heat network, the ETII will receive the heat network discount rate, not the ETII discount rate. These requirements are covered in a separate set of regulations specific to heat networks. There is separate guidance for heat networks.

On 26 April 2023 the government brought into force the regulations: * Energy Bills Discount Scheme Regulations 2023 (GB) * Energy Bills Discount Scheme Regulations 2023 (NI) * Energy Bills Discount Scheme Pass-through Requirement Regulations 2023 (GB and NI)

These regulations introduced the following requirements on organisations:

• to apply to be recognised as an ETII (to obtain the ETII discount) through the EBDS Application Portal
• for an intermediary to pass on EBDS support to their end users, in a just and reasonable way, as soon as reasonably practicable
• to inform customers of how they intend to do so within 30 days of receiving a scheme benefit or the scheme coming into force

In order to comply with all relevant subsidy obligations, we are capping support for applicants in Northern Ireland who trade in, sell, or manufacture goods at £2 million approximately per undertaking until further notice. We will work with organisations impacted by this restriction. 

An undertaking refers to an entity that carries out an economic activity, regardless of its legal form or how it is financed. For example, a parent and subsidiary company, two subsidiaries of the same parent company, or a company and joint venture entity in which it has a stake (and the joint venture’s other parent) may be counted as a single undertaking if they effectively operate as a single economic unit on the market.

Energy and Trade Intensive Industries

Non-domestic customers must be classed as an ETII to qualify for the enhanced level of government support offered through the ETII element of the EBDS. Sectors defined to be eligible for classification as an ETII are based on Standard Industrial Classification (SIC) codes. As set out in the rules, an organisation is an eligible ETII if a minimum of 50% of its total revenue generated from activity in one or more of the eligible SIC code sectors. This activity must be based in Great Britain and Northern Ireland. The organisation does not need to be registered with Companies House or have an eligible SIC code listed on Companies House.

A full list of eligible sectors that are in scope is available.

The organisation should familiarise themselves with the eligible ETII sectors before starting an application. The organisation should not make a speculative application under an ETII category if they do not meet the eligibility requirements. SIC 56.1 “Food and beverage service industries” is not eligible for ETII support. Organisations with no less than 50% of its total revenue generated under SIC 56.1 from Great Britain and Northern Ireland based activity should not apply under SIC 10.85.

The ETII sectors were identified as those meeting certain thresholds for energy and trade intensity. This is in addition to organisations currently included in existing Energy Compensation and Exemption schemes. Energy intensity was based on electricity and gas consumption as a % of a sector’s GVA using Office for National Statistics (ONS) data. Trade intensity was based on goods trade using ONS data. Qualifying ETII sectors had to be above the 80th percentile for energy and the 60th percentile for trade intensity across Great Britain and Northern Ireland.

End users

ETII eligibility applies to all volumes of energy supplied to the organisation where the eligible ETII activity occurs. ETII consumers who purchase energy for their own end-use are referred to as end users. These end users are the ultimate beneficiaries of the benefit of EBDS. In some instances there will be an intermediary between the supplier and the end user. These intermediaries should pass the benefit on to the eligible end user.

For example, where a company within a group purchases energy (under a supply contract with a licensed supplier) for other group companies, with separate meters. Some of those group companies may qualify for ETII support and others may not. This would also apply to arrangements where the energy is purchased by a third party.

In this case each eligible group company will need to apply for ETII classification as per the standard process set out in this document. If deemed eligible each group company will obtain an ETII eligibility certificate. The purchasing group company (the supplier’s direct customer) will need to provide details of the meter points associated with the supply (so far as provided to the ETII eligible group companies). The suppliers will split the group level contract into separate contracts based on the meter points related to the eligible organisation. This will allow the enhanced ETII support to be applied to the relevant meter points and consumption.

There may also be cases where a single meter serves multiple end users. Such as an office block or industrial estate where some end users operating from the site are eligible for ETII support and others are not. In these cases where there is one or more intermediary between the supplier and the ETII end-user, then the ETII end-user is required to apply for ETII support, as per the standard process.

If deemed eligible the applicant will obtain an ETII eligibility certificate and will need to provide details of this certificate to their providers. The direct customer of the supplier, when they receive the ETII’s certificate, is then required to notify the supplier. They must also provide the Secretary of State with details of the specific meter points and proportion of consumption eligible for ETII support.

Determining proportions of ETII support

As explained in this document higher levels of EBDS discount are provided in relation to end-users who are ETIIs. An ETII end-user may be a customer directly supplied with energy by a licensed supplier, or an end-user of that energy who is not directly supplied by the licensed supplier. In the latter case the direct customer, and anyone else in the chain of supply to the end user, is an intermediary for pass-through purposes. The higher discount will be applied by the supplier to some or all of the energy that it supplies to its direct customer. The benefit of that higher discount is passed down the chain of supply, as pass-through, by intermediaries, to the ETII end user(s). There is separate guidance on the pass-through requirements for energy price support provided to intermediaries.

In any chain of supply, starting with energy supplied by a supplier to its direct customer, there may be end-users who are ETIIs and those who are not. An end-user may also be an intermediary for part of the energy provided to it.

The legislation sets out the arrangements under which the supplier is informed how much of the energy that it supplies to its direct customer should attract the ETII discount. In the legislation those who provide energy in a chain of supply to an ETII are referred to as providers. ‘Provider’ includes the licensed supplier and the intermediaries in the chain of supply. Where in a chain of supply one provider provides energy or heat to another, they are referred respectively as higher-tier provider and lower-tier provider.

The legislation sets out the arrangements under which a supplier is informed of the existence of any ETIIs at the end of a chain of supply, and the proportions of the energy supplied to its direct customer which attract the ETII discount.

Where the applicant is not the direct customer of a licensed supplier it should send the ETII eligibility certificate to their energy provider. The energy provider will then send it on, until it reaches the licensed supplier. Where the applicant is the direct customer of the supplier, the applicant should not send their certificate to their energy supplier unless requested to do so by their energy supplier. DESNZ will provide this information to the energy supplier on behalf of the applicant. Further information on this process can be found in the “after the ETII has applied for support” section of this guidance.

Each other provider in the chain of supply must then, when a certificate is sent to it by a lower-tier provider, sent it to its higher-tier provider. The final step in this process is a direct customer sending the certificate to its supplier. The customer is required at the same time to give certain information to DESNZ as detailed in the “after the ETII has applied for support” section of this guidance.

In each customer billing cycle, information about the proportions of energy attracting the ETII discount (referred to as ETII proportions) is sent up the chain of supply. For this to happen, providers in the chain need to know the timing of the billing cycle. The supplier or its direct customer is required to send information down the chain about billing periods in the supply contract. These are referred as ‘benefit calculation periods’.

The goal of the arrangements is that each provider (as intermediary) will pass through the benefit of the ETII discount to its lower-tier providers until it reaches the ETII entitled to it. Applied in reverse, that pass-through process is the way in which the supplier at the ‘top’ of a chain of supply is informed of ETII proportions.

For each benefit calculation period, the ETII’s energy provider must establish what proportion, of the total scheme benefit that it receives from its higher-tier provider that it will either:

• pass on to ETIIs and other organisations
• be entitled to retain itself

The provider will then send this information to its higher-tier provider, who repeats the process (based on the information it receives from all its lower-tier providers, and for itself). There is a similar requirement in relation to domestic heat consumers.   Working ‘up’ the chain of supply, this information reaches the direct customer, who repeats the process and sends to the supplier three proportions:

• those in which energy supplied in the benefit calculation period attracts the ETII discount
• those in which energy supplied in the benefit calculation period attracts the Qualifying Heat Supplier discount
• those in which energy supplied in the benefit calculation period attracts the baseline discount

The supplier is then required to treat the supply contract with its customer as if it were three separate contracts, each for the supply of one of those categories of energy. The supplier will allocate the total energy supplied between those separate contracts based on those proportions.

For each benefit calculation period, this process happens in advance, on an estimated basis (before the metered quantity is known). This will allow the supplier to be informed about the proportions to be applied in its original bill for that period. Once the customer’s bill has been issued (and the metered quantity is known) it happens a second time, by way of adjustment. Further adjustments may be needed in relation to the same period, for example, where an ETII only obtains its certificate after the relevant period. However, after the first 3 months of the scheme, the supplier is not required to revise its billing more frequently than every 90 days. This is unless the amount of the adjustment exceeds certain thresholds, in which case it must be done within 30 days.

The thresholds for 30 day billing are the:

• change in ETII proportion exceeds 3 percentage points
• financial amount of the adjustment exceeds £5000

Requirements on ETIIs, whether benefitting from the EBDS or not

ETIIs will be eligible for the higher level of support if their organisation:

• meets the definition of an ETII as defined in the regulations
• Is provided with gas or electricity which has been supplied (to them directly or to an intermediary) by a licensed supplier

Where these eligibility criteria are met, the ETII needs to comply with the application requirements in order to get certified.

Exclusions

The following are excluded from the scheme:

• gas which is used for the purposes of generating and exporting material quantities of electricity back to the grid, including where this has been stored first - with the exception of Combined Heat and Power schemes that have an installed electrical generation capacity of ≤ 5MWe that could be eligible for discount on the amount sold to the grid as well
• any gas or electricity made available, or used to make heating, hot water, or electricity available to customers in the Republic of Ireland
• the ETII support is a subsidy and therefore cannot be given to an insolvent business

Ringfencing considerations

In very limited scenarios, ETIIs in GB may be required to have ringfencing provisions in place. This is to prevent the benefit of the subsidy being passed on to an undertaking in Northern Ireland. Further guidance will be provided in due course.

Application requirements

These regulations require all eligible ETIIs to apply for a specific higher ETII EBDS rate through a digital application portal.

ETIIs will have 90 days from the scheme introduction date of 26 April 2023 to submit an application. If an ETII becomes eligible after the scheme opening date they will have 90 days from the date at which they became eligible to submit an application, subject to scheme duration. Successful applications will result in an eligibility certificate being issued and where possible provided to the ETIIs energy supplier. Late applications will be rejected. We advise eligible ETII’s to apply to the scheme now, even if they would not currently receive a discount because the wholesale price of their energy is below the threshold.

DESNZ has built a digital system to manage the application process. The system is used for:

• applicants to check their eligibility
• applicants to apply
• applicants to upload documentation needed for evidence

Note that applicant information may be shared between organisations. The DESNZ privacy notice, setting out how DESNZ will handle personal data, can be found on the application portal.

Information required when applying

Applications cannot be saved and restarted later. Therefore, before starting the application process, applicants may find it helpful to have the applicable information easily accessible to them. This may include:

• organisation address and contact information - this is the name of the entity purchasing energy for the use of eligible activity
• the eligible SIC code(s) that your organisation’s activity is classified as, regardless of whether you are a company or have this listed on Companies House
• information on your energy provider(s), whether they are licensed suppliers, and if they are, the meter numbers associated with each supplier supplying the organisation in Great Britain and Northern Ireland only
• signed declaration (see below) using the template provided
• any supporting evidence of eligibility as set out below
• you may also want to provide a letter from a chartered accountant, such as an Agreed Upon Procedures report, which supports your application - this is an optional requirement - an example is available on gov.uk

These documents must be submitted by direct upload via the portal during the application process. An organisation may only submit documents that are representative of their current circumstances.

The application on the portal will require a signed declaration.

The declaration must be signed by:

• a named director or equivalent of the organisation

or in the event the ETII is not a company:

• a person whose authority in relation to the organisation is most akin to that of a director of a company

which confirms:

• that the conditions set out in the Regulations regarding ETII eligibility are met
• that the ETII certification criteria were satisfied in respect of the Applicant not less than 6 months before the submission date
• that the information submitted has been prepared in accordance with the EBDS Rules
• that the information submitted is true, accurate and not misleading

The Department will not be able to consider applications further without this - see the template for this declaration.

Once your eligibility has been confirmed, you will be asked to provide an undertaking declaration.

The declaration must be signed by:

• a named director or equivalent of the organisation

or in the event the ETII is not a company:

• a person whose authority in relation to the organisation is most akin to that of a director of a company

which confirms:

• whether the ETII is a company formed of 2 or more corporate bodies or partnerships
• the total number of people employed by the organisation

This declaration must be provided within 10 business days of a request being made.  The Department will not be able to consider applications further without this:

• find the template for this declaration

Proving eligibility as an applicant

Applicants will be required to confirm that their organisation has at least 50% of its revenue generated from Great Britain and Northern Ireland based activity that is in an eligible SIC code.

To capture organisations of different types, DESNZ will accept different combinations of evidence to pass the threshold test. These follow a hierarchy of robust evidence depending on availability. Applicants are encouraged to submit the most robust evidence possible, as this will allow the Department to verify and confirm their eligibility more quickly:

• the primary revenue test would assess the latest set of financial statements showing the proportion of eligible activity over 12 months
• if the latest set of financial statements are unavailable, we will accept a minimum of the most recent two quarters’ financial accounts for newly formed, or newly eligible organisations

To determine the proportion of an organisation’s ETII activity, the calculation would be [Total eligible revenue over 12 months / Total organisation revenue over 12 months = X%].

Table 1. ETII evidence requirements by organisation type

Organisation type	Evidence requirements	Chartered accountant
Company	License or Trade body details (if available). End-of-year company accounts; the most recent full-set of end-of-year accounts. If not applicable, evidence of company accounts over 6 months at a minimum. An income statement referring to the same time period as the accounts. A breakdown schedule which separates activities between eligible and ineligible SIC codes. A sample of sales invoices which represent the eligible activities.	Recommended
Charities	License details (if available). End-of-year company accounts; the most recent full-set of end-of-year accounts. If not applicable, evidence of company accounts over 6 months at a minimum. An income statement referring to the same time period as the accounts. A breakdown schedule which separates activities between eligible and ineligible SIC codes. A sample of sales invoices which represent the eligible activities, or remittance advice.	Recommended
Sole traders and partnerships	The same as other commercial entities where available, or; A sample of sales and/or purchase invoices which represent the eligible activities. VAT returns.	For the organisation to consider the cost of the report against estimated scheme benefit.
Public libraries	Same as commercial entities where available, or use of floorspace combined with a declaration from a Director or equivalent.	-

If deemed eligible for ETII support the certificate (and the entitlement to ETII support) will be backdated to the latter of:

• commencement of the Scheme on 1 April 2023
• commencement date of eligible activity

Proving eligibility as a local authority

In some instances, it may be difficult for local authority institutions to provide clear evidence of their revenue due to the complexity/opaque nature of their funding arrangements. In such cases, DESNZ is willing to consider the use of floor space to determine the relevant premise’s eligibility. This must be provided in conjunction with a declaration from a Chief Executive, Chief Financial Officer or equivalent official. The declaration must confirm that a minimum of 50% of floorspace in the premise is dedicated to eligible activity.

This test is applicable at the premise level, and only meters at that premises will be eligible for ETII support.

Use of chartered accountants

To support your application, the Department recommends use of a chartered accountant, accredited through a recognised professional body who can provide DESNZ with a report on your primary activity. Providing an accountant report to be considered will streamline the verification process by corroborating the other evidence submitted and mitigate against delays in processing the claim. Organisations are encouraged to take up the more cost-effective agreed upon procedures route.

However, if an applicant is unable to secure an accountant report, they can still apply directly to the Department. This application would be through the portal with the required documentation set out in the guidance. These applications will be assessed manually but it will likely take significantly longer to process.

All assurance reports and documentation will be subject to our standard enforcement process and compliance checks. Applicants could be subject to civil and criminal proceedings if fraudulent activity is detected as well as any necessary clawback, where excessive support is given to an organisation.

An example ‘Agreed Upon Procedures’ accountant report can be found on gov.uk, to be used as a guide.

When an applicant cannot provide primary revenue checks

Where an applicant is unable to provide the evidence set out in Table 1, due to its organisation type or structure, they should be prepared to submit evidence such as the below to support their claim. These documents should reflect the equivalent timeframe as latest end-of year accounts. Applicants will need to highlight the eligible revenue, and set out how they have calculated meeting the 50% threshold for revenue generated from Great Britain and Northern Ireland based activity. These can be as follows:

• sales invoices; including a description of good/service(s) sold, value of good/service(s) sold, invoice date, date at which sale took place
• if sales invoices are not applicable, a selection of invoices that demonstrate activity within an eligible sector, accompanied by proof-of-payment
• remittance advice (if provided)
• sales contracts; including a description of service/product sold, timescale under which the service or product is to be provided, signature with date, total value of contract, payment terms for when payment will be made
• despatch note; including a description of product shipped, date of shipment, value of the product shipped, signature of customer confirming receipt OR:
• goods received note; including a description of product received by customer, date of receipt by customer, value of the product received,
• purchase invoices; including a description of good/service(s) purchased, invoice date, date at which purchase took place, value of good/service(s) purchased
• purchase order; including a description of good/service(s) requested, purchase order date, value of good/service(s) to be purchased, signature authorising the purchase with date
• goods received note; including a description of product received, date of receipt, value of the product received
• VAT returns; reflecting the relevant period

After the ETII has applied for support

Once the applicant has successfully submitted an application it will be reviewed by DESNZ and a decision will be made on eligibility for the scheme. Once a decision has been made DESNZ will inform the applicant of their eligibility status via email from [email protected]. If the applicant is deemed eligible they will be issued with an ETII Certificate.

If the information you provide as part of your application does not satisfy the initial checks, you will be required to submit further evidence. If you are unable to provide sufficient evidence of eligibility your application will not be accepted. You will be notified of the outcome.

During the ETII certification process the applicant (if the direct customer of a licensed supplier) will be requested to provide DESNZ with details of their energy supplier. This will include relevant energy supply contract(s) references and applicable meter point references. These will be passed via DESNZ to the relevant supplier.

If the direct customer of the supplier, the applicant should not send their certificate to their energy supplier unless requested to do so by their supplier, or unless the supplier has not sent confirmation to them within 15 business days after the certificate was issued.

Where the applicant is not the direct customer of a licensed supplier, it should send the certificate to their energy provider (the intermediary). They will send it on, until it reaches the licensed supplier.

The certificate will detail dates associated with the scheme.

Any data discrepancies will be managed via DESNZ or Hinduja Global Solutions Limited (HGS), who are acting on their behalf.

Any dispute around the classification of contract type will need to be resolved between the energy supplier and the organisation.

DESNZ, including their contracted third party HGS, is responsible for conducting verification checks on all applications. Applicants may be required to provide additional information as part of their application before or after eligibility is determined.

Changes in ETII certification data and/or eligibility

If there are any changes in certification information provided by the relevant applicant or certified person then that person must notify DESNZ and then update the certification record.

These circumstances may include, but are not limited to:

• adding meter numbers to an application or changing meter numbers following a change in address
• change of supplier
• any change in business operations which means that your premise(s) would no longer pass the 50% eligible activity test

ETII discount calculation example

Example: An ETII customer on a Flexible Price Contract has a weighted average price (WAP) of 35p/kWh for the relevant billing period, this is the customers Reference Wholesale Price (RWP).  The billing period overall supply price is 58.33p/kWh. The Government Supported Price for ETII customers is 18.5p/kWh, and for baseline customers is 30.2p/kWh.  As the RWP is greater than both the baseline support GSP and the ETII customer GSP, this customer qualifies for both baseline support discount and ETII customer discount.

For the baseline support discount:

• the applicable baseline support discount will be RWP – GSP = 35 – 30.2 = 4.8p/kWh
• the baseline support maximum discount applicable to this contract is 1.961p/kWh
• the baseline support minimum supply price is 30.2p/kWh

For ETII customer discount:

• the applicable ETII customer discount will be RWP – ETII GSP = 35 – 18.5 = 16.5p/kWh
• the ETII customer maximum discount applicable to this contract is 8.9p/kWh
• the ETII customer minimum supply price is 18.5p/kWh

By applying the discount formula to this customer it results in a weighted discount of: 0.3max{min(4.8, 1.961, 4.8), 0} + 0.7max{min(16.5, 8.9, 18.5), 0} = 0.31.961p/kWh + 0.78.9p/kWh = 0.5883 + 6.23 = 6.82p/kWh.  This would apply to all customer consumption in the relevant billing period.

Data sharing and data privacy

DESNZ and contracted organisations will share personal and non-personal data in the form of reporting data, necessary for the purpose of enabling monitoring and to enforce compliance.

DESNZ will store data entered during this application and retain this until 30 June 2024. During this time, it will be accessible by DESNZ and our technology supplier (Tecknuovo) and our contact centre provider (HGS). This will enable provision of support to applicants who may encounter issues whilst submitting their application or updating relevant information.

Application data will also be securely held and then deleted no later than 7 years by DESNZ in line with departmental policy for the audit of financial data.

Further information on privacy notices and compliance with GDPR is available.

Fraud, error and enforcement

DESNZ will conduct robust compliance checks throughout the duration of the scheme to prevent fraud and error.

All declarations and evidence will be subject to enforcement action.

Should applicants be found in the default as set out in the EBDS regulations, they will be subject to civil sanctions and penalties set out within the EBDS regulations. This will take the form of fines as well as the reduction of the discount, enforceable by DESNZ. The necessary appeals and dispute resolutions processes has been set out in the EBDS regulations and rules.

Fraudulent activity could be subject to criminal sanctions.

If you are concerned that an organisation has ETII status that is not appropriate, you can contact DESNZ in confidence at [email protected].

If you are a relevant intermediary, see our pass-through requirements for energy price support provided to intermediaries guidance page, as these requirements may apply to you. Relevant intermediaries are any individual or organisation that holds an electricity and/or gas contract and passes on the costs of the energy supplied under this contract to an end user of the energy supplied. This would also cover intermediaries supplying a product (or service) where contractually a component of the price relates directly to the cost of electricity and/or gas.

Relevant legislation and other information

• Energy Prices Act 2020, section 19: Requirement to pass on energy price support to end users
• Energy Bills Discount Scheme Pass-through Requirement Regulations 2023
• The Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023
• Pass-through requirements for energy price support provided to intermediaries
• EBDS ETII application portal
• EBDS ETII scheme documents (templates and guidance)
• EBDS ETII scheme documents (including rules and methodology)