The Government has announced a package that will see UK businesses, including farms and rural enterprises, having their gas and electricity costs cut by around half their expected level.
Initially, the scheme, which will see prices at 21p/kWh for electricity and 7.5p/kWh for gas for businesses in England, Wales and Scotland, will run from 1 October to 31 March 2023. These compare with wholesale estimates this winter of 60p/kWh for electricity and 18p/kWh for gas.
The support package will apply to fixed-price contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts. Provided that the wholesale element of the price a business customer is paying is above the new government price, businesses on fixed-price contracts will see their per unit energy costs automatically reduced by the relevant p/kWh for the duration of the scheme.
Meanwhile, businesses on default, deemed or variable tariffs will receive a per-unit discount on their energy costs of up to a maximum of the difference between the supported price and the average expected wholesale price.
The amount of this maximum discount is likely to be around 40p/kWh for electricity and 11.5p/kWh for gas. The maximum discount will also apply to businesses on flexible purchase contracts.
While the package has been welcomed by farming bodies, there are concerns that when the support ends businesses could be left in the lurch. This is set to impact energy-intensive farm businesses, such as in the dairy sector, which are already facing increased borrowing.
For advice on related matters, contact the Smailes Goldie team.
