With Vladimir Putin’s war in Ukraine raging ever on, global energy prices are still at astronomically levels high.

This is having a massive impact on energy prices in the UK, as while Britain is not as dependent on Russian gas as much of Europe is, the instability in the international wholesale gas market has still sent domestic gas and electricity bills skyrocketing.

Indeed, despite a recent fall in the wholesale price of gas, the BBC reported that UK end users are unlikely to see any price improvements before 2024. This is as the energy companies have already bought much of the gas they intend to heat and power the UK with in advance for earlier higher prices.

This means high energy bills will continue causing havoc across the country, including in the private rental sector.

Here we will discuss how three key UK Government initiatives, the Energy Price Guarantee, the Energy Bill Support Scheme, and the Energy Bill Relief Scheme will affect landlords, as well as offer suggestions on other ways you can help reduce energy costs in your buy to let properties.

What is the Energy Price Guarantee (EPG)

Introduced by former prime minster Liz Truss on 8 September 2022, the Energy Price Guarantee caps the amount energy companies can charge domestic customers per unit of gas or electricity. While Chancellor Jeremy Hunt has reduced the schemes duration from 18 to 6 months, it will still help households this winter.

Prices for customers on standard variable tariffs have had their rates limited to 34.0p/Kilowatt Hour (kWh) for electricity and 10.3p/kWh for gas, inclusive of VAT.

Customers on a variable tariff not subject to the price cap will receive a discount of 17p per KWh of electricity, and 4.2p per KWh of gas.

Customers on a fixed rate tariff will receive the same discount, although a floor price for gas and electricity has been set at 10.3p/KWh and 34p/KWh respectively.

This is to ensure customers who fixed their rates cheaply some time ago do not receive a further discount.

How does the Energy Price Guarantee impact landlords?

If your tenants pay their own energy bills, this legislation will have no impact on you beyond your own domestic bills, as your tenants will be claiming the discount associated with your rental property themselves.

However, landlords who pay for their property’s energy bills will receive this discount directly.

Landlords are what the government calls an “intermediary”. Additional legislation covering “passthrough guidance” published on November 5 confirms that landlords need to pass on the benefit of these savings to tenants in a “just and reasonable way”.

This means that as a landlord you should pass on this saving to your tenants within 30 days. This can be either as a reduction in rent, or a direct payment.

If your tenants pay you for energy at a market rate based on how much energy they use, then you should pass on the savings you make on your bills directly to them. It is illegal to charge them more than the total amount you are paying, inclusive of the discount.

However, the legislation also accounts for landlords who have so far protected their tenants from rising energy prices.
If you have protected your tenants from increasing energy prices, say by not increasing the rent to include these costs, the amount of the discount the law considers “just and reasonable” to pass on varies.

The government website states that you can keep a portion of the discount proportional to how much you are discounting your tenant’s energy.

For example, if a landlord charges a fixed rate for energy that is now only equal to 60% of their actual energy costs, the tenants only pay for the equivalent of 60% of the total energy bill. This means the landlord is entitled to keep 40% of the EPG discount.

As another example, if a landlord has absorbed the total costs of increasing energy prices by not increasing their tenants rent, which is inclusive of bills, it is fair and reasonable for them to take 100% of the EPG discount, and not pass any on to their tenant.
In addition, if a landlord provides a common service which requires energy, for example, common area lighting, it is considered just and reasonable for them to take a proportion of the discount equal to the proportion of bought energy used to power the common service.

More guidance on the passthrough requirements are available on the UK Government website.

What is the Energy Bills Support Scheme

Confirmed in April 2022, the Energy Bills Support Scheme is providing every household in the UK with a £400 non repayable discount on their electricity bill over the winter of 2022/23.

The EBSS is automatically applied to all domestic UK electricity bills between October and March. This reduces their cost by £66 in November and October. This is to be followed by £67 for the following four months.

How does the Energy Bill Support Scheme (EBSS) impact landlords?

If your tenants pay their own energy bills, then you are unaffected by this scheme as they will again receive the discount.

Otherwise, you are again an intermediary, and the same rules apply as with the Energy Price Guarantee.

If you charge your tenants at the market rate based on their energy usage, you must pass on the entire discount within 30 days.

If you have protected your tenants from increasing energy bills, you may keep a proportion of the discount equal to the proportion of their energy bills you have protected them from.

For example, if they pay 50% market rates on the energy bill, you only need to pass on half the discount. Alternatively, if they pay for bills inclusive of their rent, and their rent hasn’t increased, landlords are entitled to keep 100% of the discount.

As with the Energy Price Guarantee, landlords can keep a proportion of the EBSS discount equal to the proportion of the bought energy used to power common services.

What if you buy energy on a non-domestic basis

If you buy energy on a non-domestic basis for your property you will not be eligible for the Energy Bill Support Scheme or the Energy Price Guarantee.

Instead, you are eligible for the Energy Bill Relief Scheme (EBRS). This works similarly to the Energy Price Guarantee but is available for business customers.

The UK Government has set supported energy prices at £211 per megawatt hour (MWh) for electricity and £75 per MWh for gas.

Business customers on fixed bills will have their bills discounted by the difference between the government supported price and what the wholesale price was on the day they fixed their energy contract.

This means if you expect your energy supplier to charge more than the government’s supported price, you will pay the governments supported price instead, and the government will pay your energy supplier the difference.

Customers on variable or flexible contracts will also see their bills discounted by the difference between the government supported price, and the relevant wholesale price. However, the scale of this discount will be limited, with a maximum discount of £345/MWh placed on electricity and a £91/MWh discount placed on gas.

The government has advised customers on variable contracts to consider switching to a fixed rate to avoid being exposed to energy price variation.

As with the EBSS and the EPG, landlords are expected to pass through any discounts from the EBRS to tenants.

However, if you are shielding them from energy prices, you can retain a proportion of the savings equivalent to the proportion you are protecting them from price increases. A government example indicates that if you are charging your tenants 50% of the total costs of their energy, you are entitled to keep 50% of the discount.

Other ways to help your tenants reduce energy costs

The UK Government has other schemes to help support people with energy costs for which your tenants could be eligible.

Tenants who claim benefits and live in privately rented housing can be eligible for help funding energy saving improvements via the Energy Company Obligation. This can include insulation work as well as upgrades and repairs to heating system. This can help improve the energy efficiency of a property.

You can advise any of your tenants who are on benefits, including universal credit, to contact your local council to find out if they are taking part in the scheme.

Alternatively, you can ask your tenant to contact their energy provider directly. The energy regulator, Ofgem, has a list of companies which are involved in the scheme on it’s website.

Beyond this, a whole host of advice is on offer. The National Residential Landlords Association says landlords should advise tenants struggling with utility bills to ensure:

  • They use thermostats and timers to control when their heating is on
  • They use a smart meter, to find out how they are consuming energy
  • Ensure they are getting all the financial support available This includes winter fuel payments, cold weather payments, and access to the warm home discount scheme. Citizen’s Advice can help tenants find out if they are eligible for any of this assistance.

In summary

There are a lot of different types of support available from the UK Government to help households with their energy bills.

Landlords who have not protected their tenants from increasing energy prices have an important legal obligation to pass on any government discount they may receive on energy bills on behalf of their tenants.

This must be done in a just and reasonable way, in accordance with UK Government legislation.

Landlords who have protected their tenants from rising energy prices are entitled to keep an amount of these discounts proportionate to the amount they have protected their tenant from rising energy costs.

Beyond the EPG, EBSS and EBRS schemes, there are more options landlords can signpost their tenants towards. These services, particularly the energy company obligation, can often benefit both landlord and tenant.

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