The government has announced a new energy bill relief scheme to cut bills for businesses, charities, and public sector organisations.
The scheme will run for six months, starting from October, and will see the government pick up nearly half of businesses' soaring energy bills. The scheme covers all non-domestic customers, which includes all UK businesses, the voluntary sector like charities, and the public sector such as schools and hospitals, whose current gas and electricity prices have sky-rocketed in the past months.
As with the Energy Price Guarantee for households, customers do not need to take action or apply to the scheme to access the support. Businesses should expect to be paying £211 per megawatt hour (MWh) for electricity and £75 per MWh for gas, which is around half of the expected wholesale price on the open market.
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The level of price reduction for each business will vary depending on their contract type. For customers on fixed-price contracts, if the wholesale element is above the new Government cap, the price per unit will be automatically reduced for the duration of the scheme.
Customers with default, deemed or variable tariffs will receive a per-unit discount up to a maximum of the difference between the Government rate and the average wholesale price over the period – the maximum discount is expected to be around £405 per MWh for electricity and £115 per MWh for gas.
For customers on flexible purchase contracts, typically those with the highest energy needs, the level of reduction will be calculated by suppliers, subject to the same maximum discount.
Chancellor Kwasi Kwarteng said: “We have stepped in to stop businesses collapsing, protect jobs and limit inflation. And with our plans to boost home-grown energy supply, we will bring security to the sector, growth to the economy and secure a better deal for consumers.”
Prime Minister Liz Truss said shops and pubs will benefit from support with their energy bills beyond the initial six-month scope of the scheme. She said: “We know that businesses are very concerned about the level of their energy bills. That’s why we are putting in place a scheme for business that will be equivalent to the scheme for households to make sure that businesses are able to get through the winter."
She added: “We’re going to review it after six months. We’ll make sure that the most vulnerable businesses like pubs, like shops, continue to be supported after that.” She said the initial scheme “will apply from the first of October to make sure businesses have that security through the winter”.
The plans have had a mixed reaction in the hospital sector. Kate Nicholls, chief executive of trade body 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.”
Guy Adams, who runs the Isle of Barra Beach Hotel in the Hebrides, said he had been quoted a 377.66% increase in his energy bills which “would probably most likely have finished us off”. He told BBC Radio 4’s Today programme: “It would not have just been that one bill, all our suppliers would have been getting roughly the same. The charges would have gone to such an extent where at present our cheapest room rate is £110 per night, we would have had to raise that to £415 per night – literally that would be the cheapest rate and there just aren’t people who would pay that sort of money.”
Emma McClarkin, chief executive of the British Beer and Pub Association, said the energy support “will be a lifeline for many pubs and brewers this winter”. But she added: “Whilst this announcement has helped businesses to breathe an initial sigh of relief as they head into this critical period, more support is needed to tackle the cost of doing business and we need a plan beyond the next six months."
Meanwhile, Labour said the government’s plans to cut energy bills for businesses has come too late for some firms. Shadow business secretary Jonathan Reynolds said: “It is farcical that the Tories have been unable to tell businesses at the sharp end of the energy crisis what they plan to do to help them until now. Labour has been calling for support since the start of the year. Businesses have been crying out for detail on these plans and, even now, there are still questions about how much this will cost and who will pay for it."
The Government will push through emergency legislation to underpin the new relief scheme once Parliament returns from its break for the party conferences in October. Companies that are not connected to either the gas or electricity grid will get some kind of equivalent support, although details will be announced later.
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