The Energy Price Guarantee: What Does It Mean For Businesses?
The Energy Price Guarantee: What Does It Mean For Businesses?
Following the government’s plans to support people with their energy costs, you might be left wondering how this will impact business owners.
Prime Minister Liz Truss announced that businesses will receive the same Energy Price Guarantee that has been introduced to cap household energy bills at £2,500 for the next two years, starting on the 1st October.
This supersedes Ofgem’s price cap, which was planned to move from £1,971 to £3,549.
However, this time limit will be different for businesses, with a guarantee only extending for six months, before which she stated they will “provide further support to vulnerable sectors, such as hospitality, including our local pubs”.
This support available to businesses will also include charities and public buildings such as schools and libraries.
A review will be concluded in the next 3 months by Business Secretary Jacob Rees Mogg to review where this support should be targeted to make sure those who need it the most will get it, meaning it is highly likely that small businesses will receive support.
Emergency legislation is being brought forward to support the policy, and expected costs will be set out later this month by Chancellor Kwsi Kwarteng.
Truss also stated that it will not be funded by a windfall tax, as it would discourage the investment needed to secure home-grown energy supplies.
A new Energy Supply Taskforce has been formed, which is in negotiations with domestic and international suppliers for long-term contracts to reduce their energy prices and increase supply security.
In attempts to strengthen our energy independence and reduce domestic prices, 100 new exploration licences have been granted to companies so that they can access gas and oil reserves in the North Sea, and plans for at least 25% of UK electricity to be generated by nuclear power by 2050 have been put in place. The 2019 moratorium on drilling for shale gas has also been lifted.
Until more detailed plans for company energy bills are outlined, it is difficult to know how businesses will be impacted by the guarantee, which may cause problems when trying to forecast business plans.
Many finance professionals have already spoken out and put pressure on the government about the need for more information and long-term support.
We will continue to update you as more details regarding support are made available.
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