Jeremy Hunt has announced that energy bills support for all businesses will be cut from March although heavy power users will receive a top up.
The chancellor of the exchequer unveiled a new Energy Bills Discount Scheme (EBDS) for UK businesses, charities, and the public sector bodies, which will operate until the end of March 2024.
The new scheme replaces the Energy Bills Relief Scheme (EBRS), which is channelling £18 billion worth of support for non-domestic customers throughout the current winter.
The cost of the replacement scheme will be capped at £5.5 billion with part of the reduction in support due to the recent drop in wholesale gas prices to pre-Ukraine invasion levels.
Non-domestic customers will see unit discounts of up to £6.97/MWh and £19.61/MWh automatically applied to their gas and gas and electricity bills respectively.
Those experiencing energy costs below £107/MWh for gas and £302/MWh for electricity will not receive support.
This wholesale price threshold, set with reference to the support provided for domestic consumers, is higher than the £211/MWh for electricity and £75/MWh for gas available under the EBRS.
The government announced a more generous level of support in the new scheme for energy and trade intensive industries with the price threshold for these customers set at £99/MWh for gas and £185/MWh for electricity.
Discounts will only apply to 70% of such customers’ energy volumes and will be subject to a maximum discount of £40/MWh for gas and £89.1/MWh for electricity.
As well as heavy industries, like manufacturers and miners, the additional discount will also be available for key social facilities such as libraries, museums, zoos and historic attractions.
The unveiling of the EBDS follows last week’s meeting at which Hunt told businesses that current levels of support are “unprecedented” ,“time-limited” and intended as a bridge to allow businesses to adapt to the higher cost energy environment.
The chancellor has also written to Ofgem chief executive Jonathan Brearley asking for an update on the regulator’s review into the non-domestic market.
The Ofgem review has been triggered by reports about challenges certain customers are facing in relation to pricing and availability of tariffs, standing charges and renewal terms, as well as the ability of some sectors to secure contracts.
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.”
Responding to the chancellor’s announcement, CBI director for decarbonisation policy Tom Thackray said: “The extension to the scheme will provide respite for many firms at the start of the year and help them plan ahead for the next 12 months with more certainty.
“It’s unrealistic to think the scheme could stay affordable in its current form, but some firms will undoubtedly still find the going hard. 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.
“Heavy energy users and those exposed to global trade are among some of the most impacted in the current crisis, so the additional support for these firms is a particularly welcome step.”
Sue Ferns, senior deputy general secretary of the Prospect union, said: “This announcement that support for non-domestic energy bills will be cut from April is a stark reminder that years of failed energy policy are not only hitting consumers, but businesses, charities, and our public services too.
“The best way to bring bills down for the long-term is to accelerate the rollout of homegrown, low carbon energy from renewables and nuclear. The government urgently needs to deliver a fully funded launch of Great British Nuclear and unblock the development of onshore wind and solar.”