Will the energy price guarantee be panacea or Pandora's Box?

Liz Truss has announced her new energy plan, but it's unclear how it will work. Credit: PA

Although the normal business of government has been suspended by the official period of mourning for the late Queen Elizabeth, the UK's economic crisis knows no such etiquette - and many British businesses and households await winter with deep trepidation.On the very day that Her Majesty died, the prime minister outlined a mammoth, record-breaking package to ease the pain of surging energy prices. But the purdah imposed by mourning means what we don't know about it significantly exceeds what we do, especially in respect of the nightmare that awaits businesses.First, Liz Truss and her officials flatly refused to share their estimates of the cost over two years of freezing the unit price of energy for households and businesses.In that vacuum, the range of credible possible costs goes from £100 billion to £200 billion - a margin of difference equivalent to more than 4% of our national income, a huge sum, almost double the government's funding for all English schools.Second, we don't even know the precise unit price of energy that households and businesses will pay. All we do know is that it will be equivalent to households paying an average annual bill of £2,500 a year.Third, we know almost nothing about how the scheme will work for businesses.

For households, the government will maintain the price by paying energy suppliers the difference between the unit price that delivers £2,500 average bills and the price cap already announced for October of £3,549 and then the higher price cap expected in another three months, and so on.Just delivering that price certainty for households could well cost £60bn a year, or £120bn over two years.

Industry and government sources tell me that the scheme for businesses will cap the unit price at the same level as for households, and energy suppliers will be subsidised by the Treasury on the basis of some kind of blend of the price of the energy, that those suppliers have already bought on a forward basis (the hedged price) and the spot market price.

This formula for compensating energy suppliers will inevitably be - to coin a technical phrase - a dog's breakfast. It will rely on the honesty of those suppliers about the prices they are actually paying to buy energy, because auditing every one of them in detail will be impossible in any kind of timely way.It also, by definition, runs counter to any kind of traditional Tory idea that businesses should be rewarded for success and penalised for failure - because energy suppliers that have bought their 'forward energy' stupidly at inflated prices will receive a much bigger subsidy than those suppliers that showed greater market prowess.

Liz Truss announced the plan the day the Queen died. Credit: PA

And by the way, in the current absence of the formula for compensating suppliers for their business contracts, it is totally impossible to calculate what this corporate aspect of the energy price guarantee will cost taxpayers.That said, we know it will be HUGE - because business consumption of energy exceeds household consumption.The government showed it is painfully aware the bill could be eye-wateringly big, because - unlike for households - Liz Truss only promised price certainty to businesses for six months.So a fourth thing we don't know is how businesses will be helped with their energy bills from next spring. The PM said help for some business sectors would continue, though she would not specify which sectors and what kind of help would be forthcoming.Finally, it is important to recognise that even with the relatively little we know about the new fixed business tariff,  it is clear that the energy costs for most businesses will be double or more than what they paid last winter.On that basis, even with the record-breaking support provided by the new prime minister and chancellor, many thousands of them will not survive, especially if they think they face a "cliff edge" of soaring prices after the cap ends in six months.All this and more needs to be debated and soon. There is something extraordinary that so little of substance is known about what will be the most expensive ever government intervention in the private sector - and implemented, no less, by a PM and chancellor who claim to believe in shrinking the size of the public sector.It will be quite a moment, probably in the middle of next week, when the most free-market of their colleagues, Jacob Rees-Mogg, the business secretary, finally unveils all we don't yet know - and we'll see if the energy price guarantee is panacea or Pandora's box.