By Nicholas Earl
The energy sector raised concerns over the timescale of Government plans to provide emergency support for businesses to combat soaring wholesale costs.
Downing Street rolled out the Government Energy Bill Relief Scheme earlier today, which will provide a discount on wholesale gas and electricity prices for all non-domestic customers for six months over the winter.
This includes not just all UK businesses, but also charities and the public sector such as schools and hospitals.
The announcement came ahead of the Government’s mini-budget, will be delivered to the House of Commons on Friday.
To administer the support, the Government has set a Supported Wholesale Price – expected to be £211 per MWh for electricity and £75 per MWh for gas, less than half the wholesale prices anticipated this winter – which is a discounted price per unit of gas and electricity.
However, some business energy suppliers have questioned the timeframe of the support package.
Anthony Ainsworth, chief operating officer at Npower Business Solutions praised the package, which he believed would provide relief for many businesses across the country.
But he also questioned the timeframe of the support – with wholesale costs expected to remain elevated well beyond the next six months.
In his view households remained more insulated from market volatility with the two-year price cap freeze.
He said: “So the question is, what happens after six months? We have campaigned for more support for businesses to enable them to reduce overall energy consumption. There is a real need to accelerate energy efficiency initiatives, whether that is through targeted incentives or extending schemes that provide tax breaks for installing more efficient equipment.”
Big Five supplier EDF Energy (EDF) was pleased that the Government offered clarity on how businesses, having previously pledged to offer equivalent support for businesses as households.
They also considered the measures to only be a short-term solution for the current crisis.
An EDF spokesperson said: “The government had been under pressure to publish more details of how it would support businesses with their energy bills this winter, so the announcement of the Energy Bill Relief Scheme ahead of the emergency Budget on Friday will be welcome – at least for the short term.”
Energy boss calls for greater focus on demand
EON UK chief executive Michael Lewis also raised concerns over the length of the package, and called for a “longer-term view.”
He also believed there should be more focus on reducing demand through energy efficiency measures.
Lewis said: “We have also campaigned for more support for businesses to enable them to reduce overall energy consumption. There is a real need to accelerate energy efficiency initiatives, whether that is through targeted incentives or extending schemes that provide tax breaks for installing more efficient equipment.”
Meanwhile energy specialist Cornwall Insight has defined the package as significant relief for many businesses and organisations.
Robert Buckley, Head of Relationship Development at Cornwall Insight said: “The reduction in energy costs will be substantial. As a proxy and noting the challenge of calculating a homogenous discount across so many contract types, this represents a 45 per cent discount to closing wholesale energy prices as at the end of last week. The support effectively reverts the market back to where it was price wise in the Spring of 2022. It could work well for small and medium businesses that buy their energy on fixed price contracts.”
He did however, raise concerns over larger businesses operating on flexible contracts.
Buckley concluded: “With bigger businesses using a mixture of cheaper and more expensive energy, understanding what the scheme means for them will be a matter of individual assessment.”
Free-market think, the Institute of Economic Affairs, believed that tax cuts would have been a more credible solution.
Energy analyst Andy Mayer said: “The Energy Bill Relief Scheme replicates the domestic Energy Price Guarantee for businesses. The government has done well to deliver a comparable scheme quickly, avoiding inconsistency. But tax cuts and targeted support would have been a more effective solution, encouraging less energy use, while rewarding those who had already invested in energy. A better plan would be cutting rates, VAT and payroll taxes for businesses, lowering general taxation for working people, and upping welfare for the vulnerable.”
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