THE NEW YORK TIMES

U.K. Cuts Energy Bills for Companies

Through Winter
By Eshe Nelson

Sept. 21, 2022Updated 9:14 a.m. ET

After freezing energy bills for households, the British government said it would “stop
businesses collapsing” by limiting an expected rise in the price of electricity and natural
gas.

Commuters in London’s Embankment district in August. The U.K. government

announced it would cut energy bills for companies through winter. Credit...Alice Zoo for
The New York Times
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The British government announced details of a plan bills on Wednesday to cut energy
costs for companies over the winter, after industry groups warned that soaring
were threatening the survival of countless businesses.

Beginning in October and lasting for six months, businesses, charities and other public
sector organizations including schools and hospitals will see the wholesale price per unit
they pay for energy set at 211 pounds (about $240) per megawatt-hour of electricity and
£75 for natural gas. The government said this was less than half of the wholesale prices
anticipated for winter. It will revert prices back to where they were in the spring,
according to Cornwall Insight, an energy research and consulting company, which said
the reduction to energy costs would be “substantial.”

Energy prices have soared across Europe as Russia has restricted the flow of natural gas
to the region and countries have scrambled to find alternative sources of energy. While
wholesale gas prices, which have a large influence on electricity costs, have dropped
from recent record highs, they are still much higher than in recent winters. Households
and businesses in Britain, even with the caps, are still confronting higher than usual
energy costs, which have contributed to rising prices for other goods and services,
squeezing budgets.

The business-focused plan accompanies a sweeping initiative to freeze household energy

bills for the next two winters. These expansive policies have been announced without
official estimates of how much they will cost. Economists predict that the household bill
freeze could cost £150 billion. But since the plans depend on volatile wholesale market
prices for energy and a wide range of business contracts, the eventual bill is uncertain.
Economists are expecting a large increase in government borrowing to fund the policies.

Martin Young, an analyst at Investec, estimated that the cost for the business policy
could range between £22 billion and £48 billion. Cornwall Insight said the cost to the
government could be £25 billion.

The new government, under Prime Minister Liz Truss, has just begun its work in
earnest after a national mourning period for Queen Elizabeth II. Ms. Truss announced
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the plan to limit household bills on Sept. 8, promising “equivalent support” for
businesses. Hours later, the queen died, putting much of government activity on hold.

Now, the weight of the economic and social crises facing Britain have returned to the
fore, with consumers contending with the fastest increase in inflation for 40 years and
the specter of recession looming over the economy. Ms. Truss and her chancellor of the
Exchequer, Kwasi Kwarteng, have committed to boosting economic growth quickly.
They have argued that tax cuts will do this, and some of these cuts are expected to be
announced later this week. With big spending and tax cutting prominent on the agenda,
there are signs that the government’s fiscal plans aren’t sitting well with investors.

“We have stepped in to stop businesses collapsing, protect jobs and limit inflation,” Mr.
Kwarteng said in a statement on Wednesday.

The discount that companies receivewill vary depending on the type of contract a
business has signed — for example, variable or fixed — and when they agreed it. There
will be maximum discounts applied to variable tariff contracts. The government also
said it intends to review the subsidy in three months and identify the most vulnerable
businesses that it would keep supporting after six months.

“This support package is significant and will ease the cost pressures that have been
piling up on businesses,” Shevaun Haviland, the director general of the British
Chambers of Commerce, said in a statement. She added that support for six months
wouldn’t be long enough to encourage businesses to make investment plans.

“There are a range of other challenges that must be addressed including labor shortages,
supply chain disruption, and rising raw material costs.” Ms. Haviland added.

Eshe Nelson is a reporter in London, where she writes about companies, the
British economy and finance. @eshelouise