Business energy bills could be cut by a third under government planon September 20, 2022 at 11:35 pm

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Jacob Rees-Mogg is expected to announce a cap on wholesale energy costs for business customers.

Man working in a high energy industryImage source, Getty Images

Businesses could have their energy bills cut by a third under government support to be announced later.

Business Secretary Jacob Rees Mogg is expected to reveal a cap on wholesale energy costs for business customers.

It is thought the limit will be 21.1p per kWh for electricity and 7.5p per KWh for gas – a discount of a quarter to a third on current market prices.

It means businesses facing an energy bill of £40,000 could see a reduction of £10,000 depending on usage patterns.

It is understood the changes will apply to contracts from 1 October and fixed contracts taken out since April, although show on bills from next month.

The government is likely to pass new laws to force the price cut to be passed on.

Prime Minister Liz Truss has previously said support for business would be limited to six months.

There will be an option to extend it for “vulnerable businesses”, however details of which sectors this applies to are not known.

Mr Rees Mogg is expected to confirm details of a scheme to help firms, after the government announced a multi-billion pound support package to limit bills for households.

Both businesses and households have been hit by soaring electricity and gas bills due to the rising cost of global wholesale gas, largely caused by Russia’s invasion of Ukraine.

But unlike households, businesses are not covered by an energy price cap, which is the maximum amount a supplier can charge per unit of energy. It means non-domestic bills have soared even higher in recent months.

Angie Monroe

Image source, Angie Monroe

Angie Monroe, who runs a salon in Stourport, Worcestershire, told the BBC her energy bills had tripled in the past year to around £280 a month.

She expects them to rise further in October, but as a result of previous rises, she has had to increase her prices to customers by 20%.

“It’s literally dancing on ice,” she said. “It’s detrimental – it’s worrying times for a lot of businesses.”

Ms Monroe said she would like to see energy bills for businesses capped to give her and others certainty for the coming months.

“The government needs to do something, otherwise no one will be left in business,” she said.

It is understood the government’s support to help businesses will also apply to other non-domestic settings such as hospitals, schools and community halls.

Any support is likely to be backdated because the precise mechanism and amount of support may not be finalised until November, a government source previously told the BBC.

Firms have a huge variety of different contracts based on the intensity of their usage and the mix between gas and electricity.

Many big businesses also have their own energy buying departments and systems to insure themselves, or “hedge”, against extreme price movements.

They also typically have one or two-year fixed contracts, but a significant number – the CBI estimates a third – traditionally come up for renewal before winter.

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