Government unveils price freeze for businesses

Non-domestic energy customers will see unit rates for electricity and gas slashed over the next six months as part of a major government support package.

The Department for Business, Energy and Industrial Strategy (BEIS) said the Energy Bill Relief Scheme will provide a discount on wholesale electricity and gas prices for businesses, public sector organisations and charities.

The scheme will automatically apply to contracts agreed on or after 1 April 2022 and to usage in the six months from 1 October. It will target a “supported wholesale price”, expected to be £211/MWh for electricity and £75/MWh for gas. BEIS said these rates are less than half of the wholesale prices expected this winter and represent equivalent levels of support to the recently announced Energy Price Guarantee for households.

The discounts will vary according to contract type and circumstances.

Those on existing fixed price contracts will be eligible for support as long as the contract was agreed on or after 1 April 2022 and provided the wholesale element of the bill is above the supported wholesale price. Those entering new fixed contracts after 1 October will receive support on the same basis.

Default, deemed or variable tariff customers will receive a per-unit discount on costs, up to a maximum of the difference between the supported price and the average expected wholesale price over the six month period.

BEIS said the amount of the maximum discount is “likely to be around £405/MWh for electricity and £115/MWh for gas”, subject to wholesale market developments.

For businesses which consume the largest amounts of energy, likely to be on flexible purchase contracts, the level of reduction offered will be calculated by suppliers according to the specifics of that company’s contract and will also be subject to the maximum discount.

BEIS said a parallel scheme offering comparable support will be established in Northern Ireland and will recognise the different market fundamentals. Furthermore, customers not connected to either gas or electricity will be provided with equivalent support for using alternative fuels.

“We will publish a review into the operation of the scheme in three months to inform decisions on future support after March 2023. The review will focus in particular on identifying the most vulnerable non-domestic customers and how the government will continue assisting them with energy costs,” BEIS added.

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.

“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.”

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.”

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.

“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.”

Northern Ireland

The government has also confirmed that domestic customers in Northern Ireland will receive support equivalent to the Energy Price Guarantee, as well as the £400 discount on bills that households in Great Britain are currently set to receive.

The price guarantee in Northern Ireland will take effect from November, but the government will backdate support for October bills through bills from November.

Meanwhile the government has said it will provide additional funding so that the £400 Energy Bills Support Scheme (EBSS) payments will be extended to include people such as park home residents and those tenants whose landlords pay for their energy via a commercial contract.

To ensure landlords pass the EBSS discount on to their tenants who pay all-inclusive bills, the government will introduce legislation.

It will also provide an additional £100 payment to those unable to receive support for their heating costs via the price guarantee if, for example, they live in an area not served by the gas grid. This is to compensate for the rising costs of alternative fuels such as heating oil.

These issues will be discussed in more detail at Utility Week Forum in London this November. For more information and to book your place, click here.