Energy bill support for businesses extended with much less generous promise

09/01/2023

Energy bill support for businesses extended with much less generous promise

The current scheme is set to cost the Government about £18 billion over just six months, compared with £5.5 billion over a whole year for the new plan

The Government has promised to help businesses with their energy bills for another year, but significantly reduced the amount of support they will get.

Ministers said that non-domestic customers – which include businesses, charities and schools, among others – would get up to £6.97 taken off their energy bills for every megawatt hour (MWh) of gas they use.

Electricity bills will also be discounted by up to £19.61 per MWh.

It will deliver billions of pounds of support to companies over the 12 months from the start of April, however it is considerably less generous than the support they currently get.

The current scheme is set to cost the Government about £18 billion over just six months, compared with £5.5 billion over a whole year for the new plan.

On its website the Government said that under the old scheme a pub that uses 16 MWh of gas and 4 MWh of electricity each month could have been given around £3,100 per month in support.

Under the new scheme the same pub will get £190 per month.

This massive change does not apply to all companies, and depends on when they signed their energy contract.

The plan was welcomed by the Confederation of British Industry, which said it would “provide respite for many firms”.

“It’s unrealistic to think the scheme could stay affordable in its current form, but some firms will undoubtedly still find the going hard,” said CBI director for decarbonisation policy Tom Thackray.

“The Government has done much to protect businesses through the energy crisis. It must remain open, flexible and pragmatic in its approach to volatile wholesale energy markets as the year unfolds.”

The Government also announced that energy-intensive users, such as some factories that burn a lot of gas, will get extra support.

Those businesses that are eligible will get a maximum discount of £40 per MWh of gas and £89.10 per MWh of electricity. It will apply to 70% of their energy use by volume.

Gareth Stace, director general of UK Steel, welcomed the announcement, but said the extra support for his industry might still not be enough.

“There will be concerns that the newly announced support falls short of that of competitor countries, including Germany,” Mr Stace said.

“Today’s reforms significantly narrow the help that Government will provide, with a maximum discount of £89/MWh, which stops delivering once those prices go beyond a ceiling of £274/MWh.

“The Government is betting on a calm and stable 2023 energy market, in a climate of unstable global markets, with the scheme no longer protecting against extremely volatile prices.”

Chancellor of the Exchequer Jeremy Hunt said: “Wholesale energy prices are falling and have now gone back to levels just before Putin’s invasion of Ukraine.

“But to provide reassurance against the risk of prices rising again we are launching the new energy bills discount scheme, giving businesses the certainty they need to plan ahead.

“Even though prices are falling, I am concerned this is not being passed on to businesses, so I’ve written to Ofgem asking for an update on whether further action is needed to make sure the market is working for businesses.”

Although it was welcome, the original energy support package for businesses was always seen as a short-term measure.

It was first announced in September under then prime minister Liz Truss. But while the Government promised to support households for two years, non-domestic customers were told their support would run out in just half a year.

At the time then business secretary Jacob Rees-Mogg said there would be more support for companies after that six-month period, but only after a review to see which organisations truly needed the help.

Mr Rees-Mogg said at the time that the Government had to apply a “broad brush” to the problem because urgent action was needed.

In the longer term officials would be able to figure out a more targeted – and therefore cheaper – plan.

Published: by Radio NewsHub



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