Electricity standing charges for British businesses are to almost double as companies large and small “pick up the tab” for state-mandated discounts to energy-intensive companies.
Bosses have been shocked by the rise, which will help fund upgrades to the electricity network. An announcement about the increase was slipped out three weeks ago and is set to come into force in April. Standing charges will go up by £3.7 billion, an increase of 94 per cent.
The rise will not apply to about 500 of the UK’s biggest electricity users, mainly those in heavy industry. Such companies currently benefit from a 60 per cent discount on network charges, which will rise to 90 per cent next year.
The effect of this will be to foist the cost of discounts onto businesses such as pubs, restaurants and retailers.
“It’s unacceptable to force cash-strapped hospitality businesses to pick up the tab for discounts for large, energy-intensive manufacturers,” said Kate Nicholls, chair of trade body UK Hospitality.
“It is the clearest sign yet that the energy market is broken and enormously frustrating that it is community pubs and neighbourhood restaurants that will bear the brunt once again.”
Kate Nicholls of UK Hospitality criticised the latest rise in standing charges
SONJA HORSMAN FOR THE SUNDAY TIMES
Pub operator Wetherspoons said last week that its “non-commodity” electricity costs were set to rise by £7 million.
Standing charges are fixed daily fees added to bills to cover supply costs regardless of how much energy is used.
New transmission charges were published last month after being approved by regulator Ofgem. Annual standing charges collected by the electricity network will increase from £3.8 billion to £7.5 billion and could reach £11.7 billion by 2031.
Analysts at Cornwall Insight, an energy consultancy, said transmission charges were “the number one topic of interest when we have discussions with the energy industry”. They forecast that new investment in nuclear power would add another £1 billion to standing charges.
UK businesses already have the highest electricity costs in Europe and ministers have sought to reduce the burden on heavy industry by applying discounts.
“The constant focus on the needs of the industrial strategy sectors is having real-world impacts for the other 70 per cent of the economy,” Nicholls said.
Large businesses such as steelmakers will benefit from electricity discounts whiile small firms suffer
SUNDAY TIMES PHOTOGRAPHER JAMES GLOSSOP
There have been 89,000 Job losses in restaurants, bars, pubs and hotels in the past 12 months, according to a UK Hospitality analysis of official data.
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The government said it understood concern over transmission costs “but our energy infrastructure is outdated and has suffered years of underinvestment”.
It said the hospitality sector “received tailored support via business rate relief, cutting licensing costs and providing advice to reduce energy bills”.
The effect of the new charges will extend beyond the hospitality industry. Craig Beaumont, the executive director of the Federation of Small Businesses, said: “Small firms are feeling the pressure. [They are] telling us that higher energy bills are causing them to dial back their growth plans. This situation is not sustainable.”
Jonny Haseldine, of the British Chambers of Commerce, said: “All firms need bills to be both fair and affordable.”
Ofgem said: “Investing in Britain’s energy networks provides greater protection from volatile energy markets we don’t control and the impact that has on bills, which ultimately will be better for customers. However, this cannot be done at any price — our priority will always be ensuring that the costs on consumers are as fair and efficient as possible.”