Businesses carped after the new UK government capped energy prices for households. About a quarter of UK power and natural gas consumers are small enterprises and the public sector. The Liz Truss administration has therefore offered to cap their wholesale tariffs by more than half.
The government has made a few other headline promises. Estimated costs will supposedly be revealed in Friday’s mini-Budget. If further details are lacking it may be because officials have not reverse-engineered them yet. Like jazz, politics is improvisational.
There are some numbers. The Department for Business, Energy and Industrial Strategy will cap the wholesale prices of electricity and gas for non-residential users for six months only from October 1. It will limit the power price organisations have to pay to £211 per megawatt hour. For gas it will be £75.
Considering the current forward winter prices for both, this should mean discounts of 56 per cent and 46 per cent respectively, according to Credit Suisse. The government would presumably cover the cost. Any customers on fixed-price contracts before April 2022 would not benefit.
The energy contracts of large organisations can have more bells and whistles than those of small businesses. Their tariffs not only include levies for renewable energy but also infrastructure charges. These can account for as much as a fifth of the commercial bill, notes Flint Global.
These would not necessarily be capped or reduced. This, combined with a shorter duration, makes the business energy support scheme less generous than the household one. It is also complicated. Customers on default or variable tariffs get a separate discount. This would have an estimated value of no more than £405/MWh for electricity and £115/MWh for gas.
Most such customers would be better off on a fixed tariff. The government wants them to switch.
Administering the scheme, or claiming on it, are tasks you would not wish on your worst enemy. As with its household predecessor, it creates relatively little incentive to conserve energy. The caps in both schemes put customer gas costs into a Tardis, sending them back to more than a year ago.
That posits an uncomfortable conclusion for the UK’s vote-seeking new prime minister. Energy prices might only fall because Britons feel poorer for other reasons and turn down the heating as an offset.
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