Energy Price Cap

Energy Price Cap

You may already be aware that the UK Government will freeze the energy price cap for domestic consumers. But there has also been the promise of similar support for businesses & charities as well as the public sector.

Further detail is set to be made public as it becomes available as yet.

New Prime Minister

It was only on Tuesday that Liz Truss actually became Prime Minister, but she told MPs on Thursday that the energy price cap will be frozen for the next two years at the current rate, rather than the new rate due to come into effect from October.

On average use this will mean an annual cost of £2,500, which is £1,000 below the £3,550 originally expected from October.

This is seen by many as good news but is tempered by the fact that it’s already twice what the energy price cap level was a year ago.

The £150 annual green levy will also be removed on a temporary basis, while the £400 support towards bills from October will remain.

The Prime Minister stated that the Government: ‘…will absolutely support business, charities and public sector organisations for six months on an equivalent basis and a review of prices will be concluded within three months.’ But also that ‘Companies also need to look at ways to conserve energy usage.’

She added that ‘the intervention is expected to curb inflation by 5%’.

An extension of the windfall tax was ruled out, saying that this would damage investment.

The impact of the Energy Price Cap on business

This measure may offer relief among business owners by limiting the impact of rising energy bills but there may also be some disappointment that it’s only temporary help, with a review after six months.

It does, however, provide some much needed certainty and means people and businesses can make financial plans at least until spring.

As well as the energy price cap, the Government also announced it will look at structural changes to the pricing of gas and electricity, which is currently linked, so there is no advantage to stopping the use of domestic gas or choosing a renewable supplier as energy prices are set centrally regardless of type of usage.

A new energy supply taskforce will be set up to address supply issues and negotiate new contract prices, while a new licensing round for North Sea oil and gas will kick off and there will be a speed up in deployment of clean energy, renewable and nuclear generation with the aim to produce 25% of energy from nuclear in the longer term.

The fracking moratorium will also be lifted with development with drilling subject to local community approval.

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