Government ‘can sort out’ energy cost crisis says expert
Days after announcing a freeze on energy bills for households, the Government has unveiled a new scheme to dramatically slash the electricity and gas bills for non-domestic energy customers such as businesses, charities and public sector organisations. As the price of wholesale gas skyrockets, businesses have faced major risks and many find themselves unable to cope with the costs.
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Business Secretary Jacob Rees-Mogg announced the major bills relief package today, which would effectively act as a price cap, similar to the one set for households.
Through a new Government Energy Bill Relief Scheme, the Government will provide a discount on wholesale gas and electricity prices for all non-domestic customers, which includes businesses, charities, schools and hospitals.
The scheme will apply to fixed contracts that were agreed on or after the 1 April 2022, and will also be given to businesses on deemed, variable and flexible tariffs and contracts.
The relief package, which is set to run for at least six months, will apply to energy usage from 1 October 2022 to 31 March 2023. This means that businesses will first see the effects of the package at the end of November, when they receive their October bills.
Energy crisis lifeline for millions of Brits as Truss slashes electricity bills by 40%
Business Secretary Jacob Rees Mogg unveiled the package today
As part of the support, the Government has introduced a Supported Wholesale Price, which is tipped to £211 per MWh for electricity and £75 per MWh for gas, which is less than half of the wholesale price of energy that the analysts estimate for this winter.
Like the Energy Price Guarantee for households, Liz Truss’s administration has scrapped green levies paid by non-domestic customers who will receive support under this scheme.
The Government noted that the level of price reduction for each business will vary depending on their contract type and circumstances, however, some of their calculations showed that businesses could save up to 40 percent on their energy bills.
Prime Minister Liz Truss said: “I understand the huge pressure businesses, charities and public sector organisations are facing with their energy bills, which is why we are taking immediate action to support them over the winter and protect jobs and livelihoods.
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Households will save under the energy price guarantee
“As we are doing for consumers, our new scheme will keep their energy bills down from October, providing certainty and peace of mind.
“At the same time, we are boosting Britain’s homegrown energy supply so we fix the root cause of the issues we are facing and ensure greater energy security for us all.”
In one of the examples given by the Government, a pub that uses 4 MWh of electricity and 16 MWh of gas a month would currently have a monthly energy bill of about £7,000.
According to the Business, Energy and Industrial Strategy: “At the time they signed their contact, wholesale prices for the next 6 months were expected to be higher than the Government Supported Price of £211/MWh for electricity, and £75/MWh for gas, meaning they can receive support under this scheme.
The package is similar to Liz Truss’ Energy Price guarantee
“The difference between expected wholesale prices when they signed their contract and the Government Supported Price is worth £380/MWh for electricity and £100/MWh for gas, meaning they receive a discount of £3,100 per month, reducing their bill by over 40 percent.”
They added that a school which 10 MWh of electricity and 22 MWh of gas a month would typically have an energy bill of about £10,000. However, under the Government’s new package, they would receive a discount of around £4,000.
Business Secretary Jacob Rees-Mogg said: “We have seen an unprecedented rise in energy prices following Putin’s illegal war in Ukraine, which has affected consumers up and down the country and businesses of all sizes.
“The help we are already putting in place will save families money off their bills, and the Government’s plans for businesses, charities and public sector organisations will give them the equivalent level of support.
A typical pub would save about 40 percent
“This, alongside the measures we are taking to boost the amount of domestic energy we produce to improve both energy security and supply, will increase growth, protect jobs and support families with their cost of living this winter.”
Kate Nicholls, CEO of UKHospitality, said: “This intervention is unprecedented and it is extremely welcome that Government has listened to hospitality businesses facing an uncertain winter. We particularly welcome its inclusiveness – from the smallest companies to the largest – all of which combine to provide a huge number of jobs, which are now much more secure.
“The Government has recognised the vulnerability of hospitality as a sector, and we will continue to work with the Government, to ensure that there is no cliff edge when these measures fall away.”