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Government reveals six-month energy price cap for businesses
21 September 2022

Businesses across Britain will see the Government pick up nearly half of their soaring energy bills to ensure they do not go bust, ministers have announced.

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 Government will cap the wholesale price paid by non-domestic customers, which include schools and charities. 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 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 said 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 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.”

Companies that are not connected to either the gas or electricity grid will get some kind of equivalent support, although details will be announced later. The support scheme will last for six months, with a review period halfway through.

The Government will try to decide how to continue supporting the most vulnerable businesses after the scheme ends.

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