New government scheme to help businesses through energy crisis

The new Energy Bill Relief Scheme announced on Wednesday 21st September will provide all non-domestic customers in the UK with reduced energy prices for six months.

Running from 1st October 2022 to 31st March 2023, the scheme promises to give businesses a fighting chance over the winter period, many of which were previously facing a rise in energy costs of as much as 300%. After the first three months, the government says a review will be conducted to identify vulnerable businesses requiring aid beyond the end date of the scheme.

The support provided through the scheme is equivalent to the Energy Price Guarantee announced for households earlier this month.

It involves the government fixing the wholesale price of gas and electricity at £75 per MWh and £211 per MWh respectively, less than half the wholesale prices predicted for this winter.

The discount on gas and electricity prices will benefit businesses on fixed contracts agreed on or after 1st April 2022, as well as those on flexible contracts or default, deemed or variable tariffs. As with the Energy Price Guarantee, the bills will automatically be reduced for customers without the need to take action.

The government has also announced that equivalent support will be provided for non-domestic energy users in Northern Ireland and those relying on heating oil or alternative fuels.

“Much-needed cushion for farmers”

Prime minister Liz Truss said the new scheme will give businesses certainty and a peace of mind. She declared the government is working to increase Britain’s homegrown energy supply to tackle the root cause of the crisis and establish greater energy security.

Responding to the announcement about energy support for businesses, NFU president Minette Batters said: “We welcome the detail announced today in the energy support package which will provide a much-needed cushion for farmers, growers and food businesses who are vulnerable to high wholesale energy prices.”

At the same time, Ms Batters said it’s important the government continues to assess the impact of energy bills on business confidence and production, since the package doesn’t include limits on standing charges.

“We also need urgent clarity on what support will be available for food businesses after the initial six month period,” Ms Batters added. “Energy plays a core role in the production of our food and throughout the food supply chain, from fertiliser production and heating glasshouses and livestock buildings, to baking bread and keeping facilities clean.

“Because of this close link between energy and food, the government must prioritise access to affordable energy for food production and the food supply chain. Continued support will be key to curtailing food price inflation going forward and ensuring the provision of affordable, nutritious, climate-friendly food for the country,” she concluded.

Work needed further down the line

Meanwhile, the president of NFU Scotland, Martin Kennedy, said: “NFU Scotland has welcomed the publication of details on how hard-pressed food and farming businesses are to benefit from government measures to cap crippling electricity costs, and we will share these with our members to gauge the impact.”

However, he emphasised more needs to be done further down the line. “This important intervention must be seen as the first step taken by the UK government, on behalf of all hard-pressed consumers, to provide essential support to underpin domestic food production, tackle inflation and the ongoing food security crisis.

“For the cap to be judged as effective, it must give all farming and food businesses confidence to go on, or food security continues to be undermined and prices at the shop shelf will continue to climb,” Mr Kennedy warned.

Responding to the news of fixed gas and electricity prices for businesses across the country, CLA president, Mark Tufnell, said it’s “welcomed to an extent”.

He added: “A six-month cap is too short a time span for most businesses. They need certainty of their cost base if confidence is to return in the medium term.

“It is vitally important that the government puts in place measures that will avoid a cliff edge in profitability that will simply perpetuate the difficulties that many businesses face today when the cap comes to an end.”

Mr Tufnell said that while the cap on the unit rate makes sense, the government must stop the substantial and largely unjustified increase in standing charges. He expressed the pressing need for more details on the scheme and how it applies to businesses.

NPA senior policy adviser Charlie Dewhirst said the discount on bills is a much-needed lifeline for many pork producers. “This is very welcome news for an industry that is facing eye-watering energy prices over the winter, on top of continued high input costs.

“In the last two years, the sector has lost £600 million and contracted by at least 20%. Energy price inflation has been the final nail in the coffin for some producers but this new scheme will hopefully ease the financial pressures on others who have survived up to this point.”