The PRA has welcomed new measures to help businesses cope with rising energy bills, but has called for a longer-term deal for forecourts.
The business secretary Jacob Rees-Mogg today revealed details of the government’s Energy Bill Relief Scheme, which will put a cap on the cost of gas and electricity for businesses. for six months.
The government has set a Supported Wholesale Price – expected to be £211 per MWh for electricity and £75 per MWh for gas, which it says is less than half the wholesale prices anticipated this winter – running for an initial six-month period from 1 October 2022 to 31 March 2023.
The level of price reduction for each business will vary depending on their contract type and circumstances:
- Customers on existing fixed price contracts will be eligible for support as long as the contract was agreed on or after 1 April 2022. Provided that the wholesale element of the price the customer is paying is above the government supported price, their per unit energy costs will automatically be reduced by the relevant p/kWh for the duration of the scheme. Customers entering new fixed price contracts after 1 October will receive support on the same basis.
- Those on default, deemed or variable tariffs will receive a per-unit discount on energy costs, up to a maximum of the difference between the supported price and the average expected wholesale price over the period of the scheme. The amount of this maximum discount is likely to be around £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments. Non-domestic customers on default or variable tariffs will therefore pay reduced bills, but these will still change over time and may still be subject to price increases. The government said it was therefore working with suppliers to ensure all their customers in England, Scotland and Wales are given the opportunity to switch to a fixed contract/tariff for the duration of the scheme if they wish, underpinned by the government’s Energy Bill Relief Scheme support.
A parallel scheme, based on the same criteria and offering comparable support, but recognising the different market fundamentals, will be established in Northern Ireland.
A review into the operation of the scheme will be published in three months to inform decisions on future support after March 2023. The review will focus in particular on identifying the most vulnerable non-domestic customers and how the government will continue assisting them with energy costs.
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.”
PRA executive director Gordon Balmer said: ““While I welcome the government’s recognition of the need to support businesses, six months of relief does not provide forecourts with sufficient support to survive these critical times.
“If the price of energy rises, our members will face the prospect of having to raise the margin they earn on fuel with the consequent impact on pump prices and ultimately inflation.
“The ongoing supply of fuel at forecourts is essential for national resilience. Last year we witnessed the chaos that results when there is a run-on fuel, and we are determined to not let that situation repeat itself.
“The closure of forecourts could be devastating for many communities. Many of our members are family-owned single sites that provide customers with both fuel and food in a convenient location and at an affordable price. “Regrettably, higher energy bills might have to be covered by increasing the price of fuel and food and this could lead to their customers no longer being able to afford to buy their products.”
He concluded “For the continued functioning of the economy and the preservation of the fuel resilience strategy, PRA wrote to the Chancellor of Exchequer urging to extend government support in the form of the energy price cap to forecourts to a year, with the option to renew for an additional year.”
ACS chief executive James Lowman said: “We strongly welcome the government’s support package which will provide a lifeline for the UK’s local shops, enabling them to keep trading and serving their communities.
“We will continue to work closely with the Department for Business, Energy and Industrial Strategy on longer-term solutions to the energy crisis facing convenience stores and other businesses, including ways to incentivise investment in energy efficient technology.”
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