Liz Truss’ Energy Bailout: The Key Points at a Glance | Energy industry

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Help for consumers

Liz Truss has promised to freeze energy bills at an average of £2,500 a year for the next two years from October 1 under the ‘Energy Price Guarantee’, replacing the current cap on Ofgem energy price which was due to reach £3,549 from October 1. The freeze includes the temporary removal of green levies on household bills, worth around £150.

The government has said the measure will save the average household around £1,000 a year and comes on top of the £400 support for all households announced by former Chancellor Rishi Sunak earlier this year.

Households that do not pay directly for gas and electricity from the grid, such as those living in park houses, using fuel oil or on heating networks, will not be worse off and said they would receive personal support through a separate fund.

Help for businesses

Businesses and public sector organizations will be offered a new six-month program offering “equivalent support” with limited details, which is expected to be an intervention to subsidize the wholesale price of gas. A review will take place in three months to determine if the program needs to become more focused.

New oil, gas and hydraulic fracturing licenses

A new round of oil and gas licenses will be launched next week and is expected to result in more than 100 new licenses.

There will be a lifting of the moratorium on shale gas production in the UK. “This will allow developers to apply for planning permission where there is local support, which could allow gas to arrive as early as six months,” the government said.

The government decided to publish the British Geological Survey report on fracking, which was commissioned by then Business Secretary Kwasi Kwarteng earlier this year. The study suggests that “more drilling is needed to establish data on shale resources and seismic impacts”, reopening the door to an industry that has been under a moratorium since 2019.

The government hopes to “continue to make progress” on its mission to produce 24 gigawatts of electricity from nuclear power by 2050. A dedicated body, Great British Nuclear, has been set up to try to achieve this goal.

Truss also announced a review of the government’s net zero strategy, as part of the “altered economic landscape”. The review is likely to raise alarm bells among environmental campaigners, but will be chaired by Chris Skidmore, who chairs the Net Zero support group of Tory MPs and is a key supporter of meeting the targets.

Assistance to suppliers

The Treasury will work with the Bank of England to “address the extraordinary liquidity needs faced by energy companies operating in the wholesale gas and electricity markets in the UK”. The Energy Markets Financing Facility, designed as a “last resort”, is designed to “enable energy and financial market stability, and reduce costs for businesses and consumers. It will open” by the end of October or sooner.” Energy companies have sought to secure their balance sheets amid fears of having to buy their energy in advance in volatile wholesale markets.

Reforms in the structure and regulation of energy markets should be undertaken after a review of regulations.

Fund support

The government will fund the program to reduce the unit cost of energy through increased borrowing, likely to exceed £100 billion. However, sources in Whitehall said estimates of the cost of the scheme would not come until the Chancellor’s budget statement later this month.

Truss said a new windfall tax on energy companies would “discourage the very investments we need to secure local energy supply”.

Wholesale price reduction

An energy supply task force, led by Madelaine McTernan who led the UK’s Covid vaccine task force, has entered negotiations with ‘domestic and international suppliers’ to agree contracts that reduce the price they charge for energy.

The task force will also negotiate with power generators – including wind, solar and nuclear generators, some of which have seen windfall gains from rising wholesale gas prices – to reduce the prices they charge. The talks follow proposals for a scheme where producers under revolving obligation contracts are encouraged to switch to contracts for difference.

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