Prime Minister Liz Truss has set out decisive action to support people and businesses with their energy bills and tackle the root causes of the issues in the UK energy market through increased supply – ensuring the country is not left in the same position again.
Under new plans, a typical UK household will pay no more than £2,500 a year on their energy bill for the next two years from 1st October, through a new ‘Energy Price Guarantee’ which limits the price suppliers can charge customers for units of gas. This takes account of temporarily removing green levies, worth around £150, from household bills. The guarantee will supersede the existing energy price cap.
This will save the average household £1,000 a year based on current energy prices from October. It comes in addition to the announced £400 energy bills discount for all households and together they will bring costs close to where the energy price cap stands today.
The new guarantee will apply to households in Great Britain, with the same level of support made available to households in Northern Ireland.
Those households who do not pay direct for mains gas and electricity – such as those living in park homes or on heat networks – will be no worse off and receive support through a new fund.
Today’s action will deliver substantial benefits to the economy - boosting growth and curbing inflation by 4-5 points, reducing the cost of servicing the national debt.
The historic intervention comes after a failure to invest in home-grown energy and drive reform in the energy market. Putin’s weaponisation of energy supply has exposed the UK’s vulnerability to the volatility of global markets, coupled with a regulatory framework which is no longer fit for purpose, which is driving up bills and holding back economic growth.
As businesses have not benefited from an energy price cap and are not always able to fix their energy price through fixed deals, many are reporting projected increases in energy costs of more than 500%.
A new six-month scheme for businesses and other non-domestic energy users (including charities and public sector organisations like schools) will offer equivalent support as is being provided for consumers. This will protect them from soaring energy costs and provide them with the certainty they need to plan their business.
After this initial six-month scheme, the Government will provide ongoing, focused support for vulnerable industries. There will be a review in 3 months’ time to consider where this should be targeted to make sure those most in need get support.
The Government will provide energy suppliers with the difference between this new lower price, and what energy retailers would charge their customers were this not in place. Schemes previously funded by green levies will also continue to be funded by the Government during this two year period to ensure the UK’s investment in home-grown, secure renewable technologies continues.
Whilst the intervention will be funded by the Government, action is being taken to significantly reduce the cost over time, including:
A new Energy Supply Taskforce – led by Madelaine McTernan who headed up the UK’s successful Vaccine Taskforce has begun negotiations with domestic and international suppliers to agree long-term contracts that reduce the price they charge for energy and increase the security of its supply. The Taskforce and Department for Business, Energy and Industrial Strategy will negotiate with renewable producers to reduce the prices they charge as well.
HM Treasury are announcing a joint scheme, working with the Bank of England, to address the extraordinary liquidity requirements faced by energy firms operating in UK wholesale gas and electricity markets. The Energy Markets Financing Scheme will enable stability to both energy and financial markets, and the economy, and reduce the eventual cost for businesses and consumers. The scheme will provide short term financial support and will be designed to be used as a last resort.
Learning from the mistakes of the past, the Government is taking action to accelerate domestic energy supply, increase our energy resilience and achieve our ambition to make the UK an energy exporter by 2040:
- Launch a new oil and gas licensing round as early as next week, expected to lead to over 100 new licences.
- Lift the moratorium on UK shale gas production. This will enable developers to seek planning permission where there is local support, which could get gas flowing in as soon as six months.
- Drive forward the acceleration of new sources of energy supply from North Sea oil and gas to clean energy like nuclear, wind and solar.
- Continue progressing up to 24GW of nuclear by 2050, with Great British Nuclear helping to set direction of getting new nuclear projects online in the UK.
- Undertake fundamental reforms to the structure and regulation of energy market through recommendations from a new review of the UK Energy Regulation.
- Launch a review to ensure we are meeting our Net Zero 2050 target in an economically-efficient way, given the altered economic landscape. Chaired by Chris Skidmore MP and reporting by the end of this year, it will ensure delivering the target is not placing undue burdens on businesses or consumers.