Energy Bill Relief Scheme – how it works

Jacob Rees-Mogg has unveiled an Energy Bill Relief Scheme that will slash businesses’ energy bills in half.

The Business Secretary confirmed that the Government will cap cap bills at 21.1p per kilowatt hour for electricity and 7.5p per KWh for gas – less than half the expected cost this winter – to allay fears that thousands of small businesses could go bust without state help.

The Government will pay providers to make up the difference.

>See also: Business energy plan what it means for you

The Energy Bill Relief Scheme only applies to the wholesale costs. Businesses pay other charges on top but these are relatively small.

It comes two weeks after the Government stepped in to cap household energy bills at £2,500 per year for two years from October. By comparison, the household energy price cap was set at 34p/kWh for electricity and 10.3p/kWh for gas.

The measures, which will be applied directly to bills, will begin in October – when most small businesses renew fixed-term contracts — and will last for six months.

>See also: Business energy help backdated to October

Schools, charities, hospitals and other non-domestic organisations will also be covered by the Energy Bill Relief Scheme.

A parallel scheme will be established in Northern Ireland, while the Government said it will provide equivalent support to non-domestic consumers who use heating oil or alternative fuels instead of gas.

But energy suppliers fear they will be unable to get the Government support delivered to business customers until November, meaning bills under the Energy Bill Relief Scheme will need to be backdated to October 1.

Businesses typically have bespoke contracts with their energy suppliers and agreements can vary greatly by industry.

Many businesses on fixed term deals have to renegotiate their agreements in time for October 1: traditionally a key anniversary for contracts in the corporate market.

Prime Minister Liz Truss said: “I understand the huge pressure businesses … 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.”

Investec analyst Martin Young told the Daily Telegraph that the Energy Bill Relief Scheme could cost £25bn or more, with other experts putting the price tag at £40bn.

More on the Energy Bill Relief Scheme

Just one supplier has fixed business energy deal from October

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