LONDON - Britain pledged on Wednesday to cap wholesale electricity and gas costs for businesses at less than half the market rate from next month, helping relieve the pressure of soaring energy costs but adding to the government's fast-rising spending.
Wholesale prices for electricity will be capped at about 211 pounds ($239) per megawatt hour (MWh) and for gas at 75 pounds per MWh, compared to forecast market rates of 600 pounds and 180 pounds respectively.
'We have stepped in to stop businesses collapsing, protect jobs and limit inflation,' finance minister Kwasi Kwarteng said.
Wholesale gas and electricity prices in Europe surged after Russia invaded Ukraine and have remained volatile since.
Groups representing businesses from pubs to steelmakers welcomed the intervention, saying the government had thrown a lifeline to companies battling to survive.
The government did not publish any estimate of the cost, but reports have put the price of six months of support at up to 42 billion pounds, on top of more than 100 billion pounds for a previously announced scheme to help households.
The final unit prices 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, the government said.
FILE - Secretary of State for Business, Energy, and Industrial Strategy Kwasi Kwarteng arrives at Number 10 Downing Street, in London, Sept. 6, 2022.
After weeks of political stasis while the governing Conservative Party elected a new leader and the country mourned the death of Queen Elizabeth, Kwarteng is due to give a fiscal statement on Friday.
This is expected to set out some detail on how he will pay for the energy scheme while at the same time delivering on promises to cut taxes, although the total cost of the energy scheme will depend on market prices over the coming months.
Investors say Friday's statement will be a critical test of confidence in British public finances as borrowing costs rise at the same time as a commitment to higher spending and banking on accelerated economic growth to pay for it.
Kwarteng said on Wednesday he had pledged to get debt down in the medium term, but it was 'absolutely right' to help families and businesses in the face of a major economic shock.
The business energy 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.