Energy bills for businesses will be slashed by around half their expected level under a new UK Government scheme.
The Energy Bill Relief Scheme will fix gas and electricity prices for all firms for six months from October 1, and will also offer help to hospitals, schools and charities.
Firms will qualify if they agreed fixed contracts with energy firms on variable and flexible tariffs on or after April 1.
They won’t need to contact their energy supplies as the discount will be automatically applied to bills.
Under the scheme, wholesale costs will be slashed to £75 per megawatt hour (MWh) for gas and £211 per MWh for electricity – amounting to around half the expected wholesale price on the open market.
It is equivalent to the cap on household energy bills that will be set this October and run for two years.
Chancellor Kwasi Kwarteng said: “We have stepped in to stop businesses collapsing, protect jobs and limit inflation.
“And with our plans to boost home-grown energy supply, we will bring security to the sector, growth to the economy and secure a better deal for consumers.”
Prime Minister Liz Truss said the government had set out the scheme because she “understood the huge pressure” businesses were facing.
She said: “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.”
How does it work?
The support a business receives will depend on what kind of contract it has with its energy supplier.
Companies on default, deemed or variable tariffs will be given a per-unit discount, but the amount of support they can get is limited.
This means that if the price on wholesale gas and electricity markets keeps soaring, their bills will go beyond those on fixed-price deals.
The regulator Ofgem’s energy price cap for the average household does not apply to businesses – leaving some facing even more sharp increases in their monthly bills.
The government said it was working with suppliers to ensure they offer businesses the opportunity to switch to a fixed contract.
The level of support offered to companies with flexible purchase contracts, which include some of the biggest energy users, will also be capped, the government said.
Setting out an example, it said a pub using 4 MWh of electricity and 16 MWh of gas that signed a fixed-price contract in August could see its bill drop from £7,000 to £3,900 as a result.
Kate Nicholls, chief executive of trade body UKHospitality, said: “This intervention is unprecedented and it is extremely welcome that government has listened to hospitality businesses facing an uncertain winter.
“We particularly welcome its inclusiveness – from the smallest companies to the largest, all of which combine to provide a huge number of jobs which are now much more secure.”
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