UK energy suppliers have a ‘moral responsibility’ to help businesses, says Andy Street

England’s energy suppliers have a “moral responsibility” to renegotiate deals with companies stuck on high-fixed-price energy deals drawn up during a historic price rise last autumn, West Midlands Conservative mayor Andy Street has said.

The call echoes warnings from businesses that thousands of companies were struggling to sign fixed contracts when energy prices were at their peak in the second half of last year – and therefore could not benefit from the recent downward trend in prices.

The government spent nearly £6bn over the winter to subsidize business energy costs but has since switched to a more generous replacement plan.

Street data shows that one in 10 companies in the West Midlands are now spending more than 20 per cent of their revenue on energy costs. “This is not sustainable. . . So we have to say to the retailer, what is your moral responsibility for this?”

He called on energy companies to do the right thing and offer to renegotiate the contract, otherwise the government should step in again and offer businesses generous targeted subsidies later this year.

Industry body Energy UK says that while suppliers often back up contracts when they can be structured, many energy companies already buy gas and electricity – at higher rates – when agreeing fixed-term contracts with customers.

Street said some businesses are willing to extend their contracts at a cheaper rate known as “mix and extend.”

Wholesale natural gas prices have fallen to around 80p since last autumn, after rising more than 80 per cent to more than £6 a term. But an estimated 93,000 businesses are facing closures or cuts because their energy bills are still being hit by the tariffs imposed six months ago, according to the Federation of Small Businesses.

“Our local Chamber of Commerce is saying that up to a third of our businesses can pay five times the market value,” she said.

I have examples of manufacturing companies offshoring the production process to sustain themselves. This is now about jobs. I have a restaurant that is literally thinking about the future just because Hail changed their cost structure.

The government said contract negotiations were “ultimately a matter for suppliers and their customers” but would hold “regular discussions” with regulator Ofgem and the industry.

The government will provide much more limited support to all companies at the same level as in the winter months under the power bill reduction scheme launched in April. The only exception is a few “energy-intensive industries” such as steel and ceramics, which have their own subsidy schemes.

Street said it is difficult to argue against government cuts given the importance of taxpayer financial protection. But the ministers said there was an opportunity to use existing schemes in a more targeted way for the most disadvantaged companies.

“This can be done through targeted support, national or regional crisis funds. Here in the West Midlands we would love for the EBDS share to be rolled out to businesses so we can target organizations we know are at risk with their energy costs.