Businesses across Great Britain will see the UK Government pick up nearly half of their soaring energy bills.
The wholesale cost of gas and electricity will be slashed for companies under a scheme which will run for six months, starting in October.
The wholesale price paid by non-domestic customers, which include schools and charities, will be capped.
The “supported wholesale price” is expected to be £211 per megawatt hour (MWh) for electricity and £75 per MWh for gas.
This is around half the expected wholesale price on the open market, and 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.”
The scheme will apply to fixed contracts agreed on or after 1 April this year, as well as to deemed, variable and flexible tariffs and contracts. It will apply to energy usage from 1 October to 31 March.
The savings will be first seen in October bills, which are typically received in November.
Prime Minister Liz Truss said shops and pubs will benefit from support with their energy bills beyond the initial six-month scope of the scheme.
She said: “We know that businesses are very concerned about the level of their energy bills.
“That’s why we are putting in place a scheme for business that will be equivalent to the scheme for households to make sure that businesses are able to get through the winter.
“We’re going to review it after six months - we’ll make sure that the most vulnerable businesses like pubs, like shops, continue to be supported after that.”
Scottish Secretary Alister Jack said: “The new price guarantee will give much-needed certainty to Scottish businesses, schools, hospitals and other public services and is being introduced as a matter of urgency as we move into winter.
“This comes on top of the Prime Minister’s monumental intervention for domestic customers, saving the average household £1,000 per year on fuel bills, and in addition to the £37bn package of support announced earlier this year.”
The government will push through emergency legislation to underpin the new relief scheme once Parliament returns from its break for the party conferences in October.
For customers on fixed-price contracts, if the wholesale element is above the new cap, the price per unit will be automatically reduced for the duration of the scheme.
Customers with default, deemed or variable tariffs will receive a per-unit discount up to a maximum of the difference between the government rate and the average wholesale price over the period – the maximum discount is expected to be around £405 per MWh for electricity and £115 per MWh for gas.
For customers on flexible purchase contracts, typically those with the highest energy needs, the level of reduction will be calculated by suppliers, subject to the same maximum discount.
A parallel scheme will be established in Northern Ireland.
The support a business receives will depend on what kind of contract it has with its energy supplier.
Organisations which signed fixed-price energy deals on or before 1 April this year will see the wholesale part of their bill capped automatically. Those who entered new fixed-price contracts after 1 October will get the same support.
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 government stated that it is 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.
It said that 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.
The Scottish Licensed Trade Association's managing director Colin Wilkinson said the plans don’t live up to the hype, as the new scheme caps the wholesale price and pubs could still be paying 200% to 300% higher bills than normal.
“There are pubs and bars currently on a rate of 90p per kWh, in comparison to 15p in normal times, the government says that the current wholesale price of gas is about 42p per unit therefore businesses should see a reduction of 21p in their unit price, but this still means much higher bills than before the energy crisis.
“Nothing in the plan tackles the problems of large deposits and bonds, particularly for the SME independent sector, nor restricts the additional margins made by the energy suppliers.”
Matthew Fell, chief policy director at the CBI, said: “This package will ease worries about otherwise viable businesses shutting-up shop and smaller companies especially will benefit from the discounted rate.
“Businesses will also want to know more about the exit strategy and what happens when the six-month cap runs out.
“The long-run solution is to double-down on energy security and to incentivise firms to push ahead with ambitious energy efficiency programmes to lower demand.”
Liz Cameron, chief executive of the Scottish Chambers of Commerce, said: “Today’s support will come as a significant relief for those firms who were facing imminent closure without support, ahead of winter where energy cost and demand will be at their highest.
“However, for those firms that will benefit, the six-month cap is not enough for them to be sufficiently reassured that the problem won’t return when the cap is no longer in effect - we are concerned that even more sudden rises in energy bills will await firms once the cap is lifted.
“We would urge the UK Government to engage immediately with the business community to properly define the ‘vulnerable industries’ cited for support after the original six-month cap.
“Scottish businesses that will still struggle to pay their energy bills despite this support, now need the Chancellor to outline further support for them in Friday’s mini-budget.”
Andrew McRae, Scotland policy chair for the Federation of Small Businesses, added: “We’re concerned that there is no mention of a cap on rises to standing charges - we’ll need to watch that closely so today’s move leads to a genuine, significant reduction in bills.
“The promise of equivalent support for those using heating oil is welcome, as it is relied on by many small businesses, especially in more rural areas.
“Yet, there are questions about what happens when the six months run out. We can’t have businesses simply falling over a cliff in the spring if this relief is withdrawn.”
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