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Does the Energy Bill mean bigger bills for business?

Details of the Energy Bill have been released ahead of its publication next week, so what does it mean for your business energy bills?

The main points in the Bill are:

  • There will be a new government-owned ‘counterparty’ to give investors the confidence they need to provide funding for low carbon electricity projects;
  • A capacity market and capacity auctions will be introduced to act as an ‘insurance policy’ to guarantee we have enough electricity in the future;
  • There will be no decarbonisation target for 2030 in this Bill; instead this will come as part of secondary legislation in 2016;
  • £7.6bn of market support for low-carbon electricity investment in 2020, up from the current £2.35bn; this will be added to energy customers’ bills.

Secretary of State for Energy & Climate Change Ed Davey said: “This is a durable agreement across the Coalition against which companies can invest and support jobs and our economic recovery.

“The decisions we’ve reached are true to the Coalition Agreement, they mean we can introduce the Energy Bill next week and have essential electricity market reforms up and running by 2014 as planned.

“They will allow us to meet our legally binding carbon reduction and renewable energy obligations and will bring on the investment required to keep the lights on and bills affordable for consumers.”

No doubt the thing most businesses will be concerned about is the potential for another increase in their bills. According to DECC’s estimate, this is expected to be a 7% rise by 2020, although other sources have claimed that this is a very conservative view.

A 7% rise, that would mean a £210 increase on the average business energy bill for an SME of £3000. And that rise is simply for the cost of the implementation of the Energy Bill’s initiatives and doesn’t take account of any other market variations.

James Constant, CEO of Business Juice, says: “The impact of these increased costs will be a serious concern for businesses.

“While the exact rise to business energy bills is currently unknown, we predict the Energy Bill will continually push bills up for businesses over the next decade. Our most recent Business Energy Barometer showed that as many as up to 300,000 companies could go out of business if energy bills continue to rise by 15%/annum, which looks increasingly likely due to these increases.

“It is admirable that the government is trying to place a greater importance on environmental goals. However, in the face of economic difficulties, it is questionable whether this is the best way to do it when considering the possible negative impact on businesses in the UK.”

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