UPDATED: Britain halves electricity and gas prices for businesses

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LONDON, Sept 21 (Reuters) – Britain said on Wednesday it would cap the wholesale cost of electricity and gas for businesses at less than half the market rate from next month, following a similar scheme for consumers, helping relieve the pressure of soaring energy costs.

It said wholesale prices for electricity would be capped at about 211 pounds ($239) per megawatt hour (MWh) and for gas at 75 pounds per MWh.

“We have stepped in to stop businesses collapsing, protect jobs, and limit inflation,” finance minister Kwasi Kwarteng said.

The level of the cap has been set at less than half the wholesale prices anticipated this winter, the government said. The price will be confirmed on Sept. 30.

Suppliers will be compensated for the reduction in wholesale gas and electricity unit prices that they are passing onto non-domestic customers, it said.

The scheme will initially apply from Oct. 1 to Mar. 31 2023, for all non-domestic energy users, including charities and the public sector such as schools and hospitals as well as businesses.

The government also announced support for households in Northern Ireland on the same level as the equivalent scheme in the rest of the United Kingdom.

Below are some of the government’s plans announced on Wednesday to help shield businesses from the rising costs:

PRICE CAP

The price of electricity will be capped at 211 pounds ($239.17) per megawatt hour (MWh) and for gas at 75 pounds per MWh. This will apply to contracts signed on April 1 and would last for six months from Oct. 1.

The government will compensate suppliers for the reduction in wholesale gas and electricity unit prices they are passing on to businesses.

A review into how the plan is working will be published in three months to help the government decide on what support to offer after March.

SAVINGS

The government said the level of the cap has been set at less than half the anticipated level of wholesale prices this winter.

Electricity prices could reach 600 pounds per megawatt hour and gas prices 180 pounds per MWh this winter.

ELIGIBILITY

The package will apply to non-domestic users like businesses and charities, and to public sector organisations such as schools, hospitals and care homes.

The government said: “The scheme is intended to be of broad application but there may be very limited exclusions, for example businesses that use gas or electricity for the purpose of generating power they are selling back into the grid, such as power stations, pumped hydro or grid-level battery storage.”

HOW IT WILL WORK

The government said suppliers will apply reductions to the bills of all eligible non-domestic customers, and that the support will be automatically applied to all eligible bills.

There will be no need to apply for the scheme. The government said savings for energy used in October will be seen in October bills, which are normally received in November.

LEGISLATION

The government said legislation will be introduced in parliament in October to enact the plans.

NORTHERN IRELAND

The plan currently applies to England, Scotland, and Wales. But the government is planning a similar policy for Northern Ireland.

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