UK businesses will be protected from soaring energy bills under an emergency government scheme that ministers hope will stem a wave of corporate collapse.
The support plan – to be introduced by the government on Wednesday – will limit the wholesale costs that energy suppliers can put on businesses’ bills, but will not define the final price that business customers pay.
Chancellor Liz Truss this month announced a huge energy support package worth around £150 billion, under which the government has pledged to help UK households and companies with electricity and gas bills. higher.
Truss at the time announced that domestic energy bills would be capped at around £2,500 a year for a typical household over the next two years.
But the details of the business plan have been delayed because of the challenges of crafting it and the complexity of corporate tariffs.
Truss told ITV News on Tuesday that the plan “will ensure that businesses are protected from the very high prices that have been predicted”.
Under the government’s plan, energy suppliers will be allowed to combine a capped wholesale price of 21.1p/kilowatt-hour for electricity and 7.5p/kWh for gas when charging business customers .
It will apply to all energy contracts signed with suppliers as of April 1 and will last for six months from October 1, according to government insiders.
But the limited wholesale price won’t be the final price businesses pay as there will be other fees – in a move that insiders say will allow a level of competition to remain in the market. school.
The retail limit announced by ministers this month for household energy bills is set at 34p/kWh for electricity and 10.3p/kWh for gas.
It is relatively straightforward to provide government assistance to households with gas and electricity bills because there is an existing retail price limit that sets the amount payable by most households.
Truss said this month businesses will receive “equivalent” government support to families, albeit for six months, not two years.
Energy suppliers were locked in talks with government officials on Tuesday about the exact mechanism by which they would implement the plan for businesses.
“It’s a systemic problem,” one person said briefly of the talks. The plan will also require law.
Energy suppliers are concerned they won’t be able to get government support for their corporate customers until November, meaning bills under the support scheme will need to be pushed back. on October 1st.
Businesses often have reservations with their energy suppliers, and arrangements can vary greatly by industry.
Many businesses that do fixed-term deals have had to renegotiate their agreements in time for October 1: traditionally an important anniversary for corporate market contracts.
Analysts at Cornwall Insight have warned that businesses with contracts expiring in October may face a fivefold increase in their energy bills.
Once the government’s six-month support for companies with their energy bills ends, ministers will focus support on “vulnerable” but yet to be identified sectors.
Truss said on Tuesday that business secretary Jacob Rees-Mogg was conducting a review to determine which industries would receive support, but suggested pubs would get help.
Prime Minister Kwasi Kwarteng will provide more details on the financial impact of the government’s energy market intervention when he delivers his Mini Budget on Friday.