New energy help unveiled for households and businesses

Liz Truss announced a furlough-scheme scale level of help for households and businesses over the next two years to help with energy costs. Although for businesses the initial period of help will be for six months.

From 1st October, a new ‘Energy Price Guarantee’ will mean a typical UK household will now pay up to an average £2,500 a year on their energy bill for the next two years. This is automatic and applies to all households.

The government says this will save the average household at least £1,000 a year based on current energy prices from October and is in addition to the £400 energy bills discount for all households announced by Rishi Sunak earlier in the year.

The price guarantee applies to all households in Great Britain and Northern Ireland and limits the price suppliers can charge customers for units of gas. This takes account of temporarily removing green levies, worth around £150, from household bills. The guarantee will supersede the existing energy price cap.

Households who do not pay direct for mains gas and electricity – such as those living in park homes or on heat networks – will receive support through a new fund.

This new measure is expected to curb inflation by 4-5 points.

Business support

Businesses have not benefited from an energy price cap and are not always able to fix their energy price through fixed deals.

Unlike households having their current bills frozen for two years, businesses and other non-domestic energy users (including charities and public sector organisations like schools) will be offered equivalent support, but only for six months.

The government has not provided details of how the business scheme will work. As for businesses on fixed-term contracts. It is not known whether these will benefit from reduced prices or remain on their current deals.

After this initial six-month scheme, the Government says it will provide ongoing, focused support for vulnerable industries. There will be a review in 3 months’ time to consider where this should be targeted to make sure those most in need get support.

The Government says it will provide energy suppliers with the difference between this new lower price, and what energy retailers would charge their customers were this not in place. Schemes previously funded by green levies will also continue to be funded by the Government during this two year period to ensure the UK’s investment in home-grown, secure renewable technologies continues.

Other action

The Government is also taking action to significantly reduce heating costs over time, including:

• A new Energy Supply Taskforce – led by Madelaine McTernan who headed up the UK’s Vaccine Taskforce – has begun negotiations with domestic and international suppliers to agree long-term contracts that reduce the price they charge for energy and increase the security of its supply. The Taskforce and Department for Business, Energy and Industrial Strategy will negotiate with renewable producers to reduce the prices they charge as well.
• Liquidity problems. HM Treasury has established a joint scheme, working with the Bank of England, to address the extraordinary liquidity requirements faced by energy firms operating in UK wholesale gas and electricity markets. The Energy Markets Financing Scheme will enable stability to both energy and financial markets, and the economy, and reduce the eventual cost for businesses and consumers. The scheme will provide short term financial support and will be designed to be used as a last resort.

Action will also be taken to accelerate domestic energy supply, increase our energy resilience and achieve our ambition to make the UK an energy exporter by 2040:

• Launch a new oil and gas licensing round as early as next week.
• Lift the moratorium on UK shale gas production.
• Drive forward the acceleration of new sources of energy supply from North Sea oil and gas to clean energy like nuclear, wind and solar.
• Continue progressing up to 24GW of nuclear by 2050, with Great British Nuclear helping to set direction of getting new nuclear projects online in the UK.
• Undertake fundamental reforms to the structure and regulation of energy market through recommendations from a new review of the UK Energy Regulation.
• Launch a review to ensure we are meeting our Net Zero 2050 target in an economically-efficient way, given the altered economic landscape. Chaired by Chris Skidmore MP and reporting by the end of this year, it will ensure delivering the target is not placing undue burdens on businesses or consumers.

The new Chancellor is expected to set out further details in a Fiscal event later this month, possibly on 21 September though that has yet to be confirmed in light of the Queen's funeral and the suspension of Parliament.