Thursday 22 September 2022

Industry reacts to government’s emergency cap for businesses

Business energy bills are set to be halved after the government stepped in to stop companies from going bust amid the energy crisis.

From next month, the non-domestic electricity price is expected to be at around £211 per MWh while gas will be £75 per MWh.

What does the industry think about the Energy Bill Relief scheme?

A lot more must be done 

The Association for Renewable Energy and Clean Technology (REA) welcomed government plans to help cut energy bills for businesses but recognised that it could not solve the long-term problems of the ongoing energy crisis.

Dr Nina Skorupska CBE, Chief Executive of the REA, said: "This scheme will provide some relief, reducing the cost of electricity, on average, by about 40-50% and the cost of gas costs by about 25% from forecast prices.

"However, a lot more must urgently be done in the medium term to avoid a similar situation once this initial six months of support comes to an end. We cannot be in the same position next winter."

What will happen after March 2023?

Electrotechnical trade body ECA has welcomed the Energy Bill Relief scheme but has warned that immediate action is needed to prevent a shock to businesses when the scheme ends in March 2023.

ECA Director of Workforce and Public Affairs Andrew Eldred said: "Our sector relies heavily on forward planning and will be desperate to know how electrotechnical businesses will be supported after 31st March 2023, when these measures fall away.

"While this short-term measure gives us breathing space, we are eager to hear whether electrotechnical SMEs will continue to qualify for support in the same way as the hospitality sector."

Work for the scheme to reach all businesses 

In response to the government's plans to help cut energy bills for businesses, Energy UK's Director of Regulation Dan Alchin said: "Energy UK welcomes support from the government to help business customers with energy bills this winter with the new Energy Relief Scheme.

"Business energy suppliers will continue to work closely with the government to ensure that the scheme reaches all businesses, charities and public sector organisations this winter."

Most businesses will still see an increase in energy bills 

Accounting firm PwC has acknowledged that the package is a "significant intervention", but has highlighted its short duration and application to a subset of firms whose contracts have expired since April.

Vicky Parker, Head of Power and Utilities at PwC UK, said: "The final costs of both schemes will change in line with movements in wholesale commodity prices for gas and electricity.

"We estimate that up to 25% of the market could be recontracting in October in addition to those that contracted in April this year. Even at the capped levels, most businesses will still see a material increase in energy costs, depending on when their original contract was signed.

"For a typical business, electricity costs are much more material than gas costs, although some will be insulated from the current high prices having signed long-term power purchase agreements."