Energy sector raises concerns over six-month window for business support
The energy sector has 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 year.
This includes not just all UK businesses, but also charities and the public sector such as schools and hospitals.
The Government has set a Supported Wholesale Price – expected to be £211 per MWh for electricity and £75 per MWh for gas – a strongly discounted price per unit of gas and electricity.
While suppliers will still pay far more their energy than last year, this is less than half the costs businesses were fearing this winter.
However, some business energy suppliers have questioned the limited six-month window for the package – with wholesale costs expected to be elevated well into next year.
It also contrasts unfavourably with households, which are set for a two-year price cap freeze on their energy bills.
Anthony Ainsworth, chief operating officer at Npower Business Solutions argued the support package either had to be extended, or more had to be done to encourage businesses to use less energy.
He said: “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.”
EON UK chief executive Michael Lewis also raised concerns over the length of the package, and called for a “longer-term view.”
He likewise 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.”
Rival 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.
But 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.”
Cost of support package yet to be confirmed
The announcement came ahead of the Government’s mini-budget, will be delivered to the House of Commons on Friday.
Meanwhile energy specialist Cornwall Insight has calculated the support package will cost at least £25bn, while Investec has predicted it will cost between £22-48bn depending on wholesale costs.
Cornwall Insight defined the package as significant relief for many businesses and organisations.
Robert Buckley, Head of Relationship Development said: “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 tank the Institute of Economic Affairs believed that tax cuts would have been a more credible solution to the crisis.
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.”