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Government to cover environmental costs

Prime Minister Liz Truss announced the introduction of the EPG last week in a bid to alleviate the pressure from rising energy prices on households.

The EPG will cap the unit price that consumers pay for electricity and gas and is expected to put a £2,500 ceiling on the average household’s bills per year for a period of two years from October 2022. This should save households at least £1,000 per year , depending on energy use, Kwarteng said in today’s Mini Budget. This will be on top of the £400 support all households will receive from the Energy Bills Support Scheme this winter.

By covering the environmental and social costs currently included in domestic energy bills – including green levies – the government will deliver £150 of the saving.

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Similar support will apply to businesses, with the Energy Bill Relief Scheme at protecting non-domestic energy users from rising energy bills by providing a discount on wholesale gas and electricity prices for the next six months, while the £40bn Energy Markets Financing Scheme, in conjunction with the Bank of England, will provide a guarantee for banks to offer emergency cash to energy firms. Overall, the energy support plan is expected to cost £60bn over the next six months.

To address the longer-term problem of rising energy costs, the government will be “making significant interventions in the energy market over the coming months”, with a new Energy Supply Taskforce seeking to negotiate long-term agreements with major gas producers. This is alongside plans to move away from gas-based electricity prices in favor of a system where electricity prices better reflect the UK’s “home-grown, cheaper and low-carbon energy sources, which will bring down consumer bills”.

Kwarteng said: “The prime minister has acted with great speed to announce one of the most significant interventions the British state has ever made.”

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