UK Government issues Energy Price Cap update

As you will no doubt be aware, the Prime Minister announced a few eye-catching headlines this morning.

Of immediate interest is the potential for a price cap to the rates which would apply to your Gas and Electricity consumption during the upcoming winter period and potentially beyond. It has been suggested in the media that this would match those already due to be implemented to Domestic supplies.

As the announcement was lacking any of the necessary detail, it is not possible at this time to provide certainty as to how this will impact you during the period in question.

While it has been suggested that this cap would apply to Business as well as Domestic supplies, it has not yet been made clear if there is any distinction between SME Businesses and those larger organisations traditionally grouped as Corporate Energy Buyers.

Domestic Energy Buyers

We do know that the Domestic cap places a limit on the unit rate (p/kWh) and Standing Charges (£/day) that the supplier can charge outside of a contracted rate. The rates themselves are yet to be published, but based on the magnitude of increase that has been discussed so far, the rates are expected to be capped around the levels shown below

Current rate

Current	p/kWh	£/day
Electricity	28	0.45
Gas	7	0.27

Projected rate

Projected	p/kWh	£/day
Electricity	35	0.5625
Gas	8.75	0.3375

Corporate Energy Buyers

If you already have a contract covering all or part of the upcoming winter (1^st October 2022 – 31^st March 2023):

As the detail has not yet been confirmed it is currently unknown how your existing agreement will be affected, although if the methodology was to match the Domestic methodology, the contract would prevail.

If you are yet to agree a contract covering all or part of the upcoming winter (1^st October 2022 – 31^st March 2023):

Again, details on how it will work for non-domestic energy buyers has yet to be provided, but.it is believed, at this stage, that if a cap was to apply to your business it would be substantially below any contract that is available currently (high level averages below, although rates will vary based on the geographical location of the meter).

Content	p/kWh	£/day
Electricity	70-80	0.75 - 0.85
Gas	24-35	0.60 - 0.80

Some suppliers are enforcing restrictions on their provision of supply agreements at the moment, with varying levels of severity.

If you are able to live with the lack of certainty around your Electricity and Gas unit rates for the upcoming Winter immediately, then there may be benefit in waiting for further statements to be released with more details. It should be noted however that this detail is not expected before W/C 19th September. As such, for any contract commencing 1st October, your options after the announcement (which is hoped to clarify which businesses the cap will refer to along with details around the status of existing contracts) will be severely limited and you will only be able to renew your relationship with your existing supplier.

If you are unable to forego certainty around your Electricity and Gas unit rates for the upcoming Winter, then the strong recommendation is that you seek to place an agreement with a supplier at the earliest convenience. Although at this stage, it seems likely that the fastest route to an agreement would be with your existing supplier.

We will be updating clients once we have more definitive information.

If you have any questions or concerns, please reach out to your Account Manager or Procurement Contact within Optimised.

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