Today, Liz Truss pledged to get businesses through the winter as she launched a huge intervention to restrict energy prices.
Amid worries of economic turbulence, the Prime Minister announced that wholesale charges will be maintained at half their expected seasonal peak, at a cost estimated to reach tens of billions of pounds.
From October to March of next year, the new Energy Bill Relief Scheme will provide a discount on wholesale expenses for all non-domestic users, with more targeted assistance anticipated afterward.
To reduce costs, the government has set a supported wholesale price, which is predicted to be £211 per MWh for electricity and £75 per MWh for gas, which is less than half of the wholesale rates forecast this winter. It will also be retroactive for contracts signed in April or after.
Ms. Truss stated in New York that the inaugural scheme will go into effect on October 1 in order to provide businesses with winter security.
She continued, “We are aware that businesses are really concerned about their energy bills.”
To ensure that enterprises are able to survive the winter, we are implementing a program for businesses that is comparable to the program for households.
“After six months, we’ll conduct a review. After that, we will ensure that the most vulnerable companies, such as taverns and shops, continue to receive assistance.
Prime Minister Liz Truss indicated that beginning in October, a cap will be implemented that will halve wholesale prices until at least March of next year. It will also be retroactive for contracts signed in April or after.
How the price limit will operate
In October, once Parliament returns from the party conference recess, the government will push through emergency legislation to support the new relief program.
For clients with fixed-price contracts, the price per unit will be automatically reduced for the length of the plan if the wholesale element exceeds the new government threshold.
Customers on default, presumed, or variable tariffs will get a per-unit reduction up to the difference between the Government rate and the average wholesale price during the term; the maximum discount is anticipated to be approximately £405 per MWh for electricity and £115 per MWh for gas.
Suppliers will compute the level of decrease for customers with flexible purchase contracts, often those with the highest energy use, subject to the same maximum discount.
In Northern Ireland, a similar program will be implemented.
The government cited a pub that consumes 4 MWh of electricity and 16 MWh of gas per month as an illustration:
They signed a fixed contract in August 2022, resulting in a monthly energy expense of almost £7,000. At the time they signed their contract, it was anticipated that wholesale prices for the next six months would exceed the Government Supported Price of £211/MWh for electricity and £75/MWh for gas, therefore they are eligible for support under this program.
The difference between predicted wholesale pricing when they signed their contract and the Government Supported Price is £380/MWh for electricity and £100/MWh for gas, thus they receive a discount of £3,100 per month, resulting in a bill reduction of more than 40 percent.
This is the first of several scheduled economic interventions this week, with Chancellor Kwasi Kwarteng delivering a mini-Budget on Friday.
The savings will first be shown in October bills, which are normally paid in November.
It follows an announcement made two weeks ago by Liz Truss that household costs will not exceed £2,500 for the next two years.
It is predicted that the State will pay more than $1 for every $3 of petrol consumed as a result of the two programs. According to industry data obtained by ITV News, businesses will be charged a maximum fixed price of £2.93 per therm, with taxpayers covering the difference between this price and the predicted market price of £4.67 per therm.
Kate Nicholls, chief executive officer of UKHospitality, remarked, “This action is unprecedented, and it is very encouraging that the government has listened to hospitality firms facing an uncertain winter.”
“We particularly value its inclusion – from the smallest to the greatest firms – which collectively create a vast number of employment that are now considerably more secure.
“The government has acknowledged the fragility of the hospitality industry as a sector, and we will continue to engage with the government to ensure that there is no precipitous decline when these measures expire.”
The household scheme will charge households a maximum of £2.93, compared to the estimated market price of £4.32 for the following year.
Yesterday, Miss Truss pledged longer-term support for businesses, stating, “We will ensure that businesses are safeguarded from the projected extremely high prices.” Pub owners may rest assured that their businesses will receive this longer-term assistance.
It was revealed last week that enterprises had not been provided with any information or numbers regarding the upcoming package, despite the fact that many of them face substantial price increases beginning next month.
Hospitality industry associations have encouraged Mr. Rees-Mogg, in his first announcement in his new position, to provide clarity to both small and large firms. A No. 10 spokeswoman said that, if necessary, the help would be retroactive to October 1 to calm anxieties over the lack of specificity in the announcement.
He continued, ‘We did see there was anxiety about the help, but what we’re saying is that we’ll provide assistance to cover their October expenditures. We are still determining whether it will require legislation.’
The reason for the delay was that any intervention plan had to be created from start.
The Business Secretary, Jacob Rees-Mogg, will announce the specifics of a six-month program to assist companies impacted by rising energy bills.
In October, once Parliament returns from the party conference recess, the government will push through emergency legislation to support the new relief program.
For clients with fixed-price contracts, the price per unit will be automatically reduced for the length of the plan if the wholesale element exceeds the new government threshold.
Customers on default, presumed, or variable tariffs will get a per-unit reduction up to the difference between the Government rate and the average wholesale price during the term; the maximum discount is anticipated to be approximately £405 per MWh for electricity and £115 per MWh for gas.
Suppliers will compute the level of decrease for customers with flexible purchase contracts, often those with the highest energy use, subject to the same maximum discount.
In Northern Ireland, a similar program will be implemented.
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