Truss sets out plans to secure energy supply and curb costs

Speaking yesterday (Sept 8, 2022) in the House of Commons, PM Liz Truss set out an Energy Price Guarantee for household energy users and businesses, plus plans to boost domestic energy supply and make the UK an energy exporter by 2040.

Addressing Parliament, Truss said: “Decades of short-term thinking on energy has failed to focus enough on securing supply – with Russia’s war in Ukraine exposing the flaws in our energy security and driving bills higher. I’m ending this once and for all.”

Under the 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 – superseding the existing energy price cap - which limits the price suppliers can charge for units of gas.

A further saving of around £150 will come from temporarily removing green levies. The measures announced by Truss are expected to save the average household £1,000 a year based on current energy prices and comes in addition to the previously announced £400 energy bills discount for all households.

Costs will be covered by government, which will provide energy suppliers with the difference between the new lower price and what energy retailers would charge their customers. Schemes funded by green levies will continue to be funded by the government during this two-year period.

“This intervention is expected to curb inflation by up to five percentage points, bringing a reduction in the cost of servicing government debt,” said Truss.

A new six-month scheme for businesses and other non-domestic energy users including charities and public sector organisations will offer equivalent support to that provided for consumers.

“After those six months we will provide further support to vulnerable sectors, such as hospitality, including our local pubs,” said Truss. “My Rt Hon Friend the Business Secretary will work with businesses to review where this should be targeted to make sure those most in need get support. This review will be concluded within three months, giving businesses certainty.”

Commenting, Peter Hogg, UK Cities Director at Arcadis, said: “[This] announcement leaves the business sector on tenterhooks. Up and down the country, businesses – especially SMEs that employ so much of our workforce – are left with a double whammy of continuing uncertainty, no price cap and, as yet, no details on an assistance package. The government needs to make clear its plans for ‘equivalent support’ to business and do so soon."

Echoing these sentiments, Richard Singleton, finance director at Menzies LLP, said: “It is disappointing that the prime minister has not confirmed a long-term package of support for vulnerable businesses that have a higher energy demand. For these businesses, the uncertainty continues, and they will have to wait for a review to be completed in three months’ time before finding out if they are in line for further help or not.

“Energy-intensive manufacturers…and other businesses that typically operate around the clock have been considering plans to drastically reduce their operational footprint or shut down completely. This Energy Price Guarantee is unlikely to be enough to prevent them from considering such measures.”

Domestic energy

According to business and energy secretary Jacob Rees-Mogg, Russia’s war in Ukraine, Vladimir Putin’s weaponisation of energy and the aftermath of Covid have exposed the need to strengthen Britain’s energy security.