Business energy prices to be cut by half under new Government support

Katy Morton
Wednesday, September 21, 2022

Energy bills for UK businesses will be cut by around half their expected level this winter under new emergency support from the Government to help those facing rising costs.

The business secretary has unveiled new energy bills support for UK businesses PHOTO Adobe Stock
The business secretary has unveiled new energy bills support for UK businesses PHOTO Adobe Stock

Unveiled by business secretary Jacob Rees-Mogg today, the new Government Energy Bill Relief scheme will see gas and electricity prices fixed for non-domestic energy customers, including businesses, charities and public sector organisations, for six months from 1 October.

Hospitals, schools and other settings such as community halls and churches will also get help.

According to the Government, the savings will be ‘first seen in October bills, which are typically received in November’.

Under the scheme, wholesale energy prices are expected to be fixed to £211 per MWh for electricity and £75 per MWH for gas, which the Government would be less than half the wholesale prices anticipated this winter.

However, the National Education Union (NEU) and the National Association of Head Teachers (NAHT) accused the Government of not going far enough, while the National Day Nurseries Association (NDNA) warned the move ‘cannot lead to a cliff-edge in six months’ time’ for childcare settings that are faced with energy bill increases of between 300 – 600 per cent.’

Under the Government Energy Relief Scheme, the level of price reduction for each business will vary depending on their contract type and circumstances.

It will be reviewed after three months with an option to extend support for ‘the most vulnerable non-domestic customers’.

A parallel scheme, based on the same criteria and offering comparable support, but recognising the different market fundamentals, will be established in Northern Ireland.

The support for businesses is in addition to the Energy Price Guarantee for households, under which a ‘typical household’ will pay on average £2,500 a year on their energy bill for the next two years from 1 October.

Further measures for families across the UK are also due to be announced today, including for those in rentals or park homes.

'I understand the huge pressures businesses, charities and public sector organisations are facing.'

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.’

'Many nurseries are small businesses who cannot absorb the enormous bills'

Purnima Tanuku, chief executive of the NDNA, said, 'We welcome the support announced today for businesses, including thousands of childcare providers that are really struggling across the UK with rising costs.

‘Many nurseries are small businesses who just cannot absorb the enormous bills they are facing.

‘Although capping energy costs will help give certainty over what will be a very difficult winter, it cannot lead to a cliff-edge in six months’ time. Childcare businesses – which have been closing at an alarming rate - are absolutely fundamental both for children’s development and for parental employment. Due to their importance and the risks they face, they must be classed as vulnerable, so they get additional future support.

‘On top of the energy they need to provide warm meals and nurturing and safe environments for our children, nurseries are also having to cope with high bills for food, staffing and other resources. They cannot keep increasing the fees to parents as they can’t afford to pay more either.

‘We are seriously concerned for the sector’s future.’

Kevin Courtney, joint general secretary of the NEU, said, ‘Six months of support only gets us to March 2023, which is clearly inadequate if prices stay high, and doesn't compensate schools for extra costs incurred. Schools need a long-term solution which meets costs, not a series of hasty and poorly considered short-term deals. 

Energy bills are a symptom of the wider problem in education funding. Funding remains lower in real terms than it was in 2010, and the meagre pay rise for teachers has not been funded by government. Unless funding is significantly improved, schools will have little option but to increase class sizes, cut subject choice, and reduce additional support.’

Paul Whiteman, general secretary of school leaders’ union NAHT, said, ‘While it is positive to have more detail on the Government’s plans to help schools with spiralling energy costs, we have real concerns that this just doesn’t go far enough.
‘Though it is good to see that schools who have reached the end of their contract and switched since April will be helped, we’re concerned that those who were hit with higher prices before that won’t be. There will be some schools who slip through the cracks.
‘We are also very concerned that schools do not have any certainty on costs beyond 6 months – schools budget for the whole school year.’

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