The government says the current level of support for firms was “unsustainably expensive”.
Support for businesses with their energy bills is to be reduced from April, the government has confirmed.
Under the new scheme, firms will get a discount on wholesale prices rather than their costs being capped as under the current one.
Very heavy energy-using sectors, mainly manufacturers, will get a larger discount than others.
But firms paying under a certain price for their energy wholesale will not get support.
The new scheme will run until the end of March 2024.
The energy support scheme is mainly used by businesses, but is also for charities, and public sector organisations such as schools and hospitals.
Wholesale gas prices are now below the level they were before Russia’s invasion of Ukraine, but still three to four times higher than their long-term average.
In its announcement, the government said it was scaling back the energy subsidies for the next financial year to £5.5bn.
The current scheme had been described as “unsustainably expensive” and was predicted to cost about £18.4bn, according to official forecasters.
Chancellor Jeremy Hunt said: “My top priority is tackling the rising cost of living – something that both families and businesses are struggling with.
“That means taking difficult decisions to bring down inflation while giving as much support to families and business as we are able.”