One of Britain’s biggest energy suppliers has warned households to brace for a further rise of more than £900 in their annual bills this year and appealed to the government to enter emergency talks over tackling the “crisis” of soaring electricity and gas costs.
ScottishPower said it expected Britain’s energy price cap to go up by about 47 per cent to an average of £2,900 a year per household when it is next adjusted by regulator Ofgem in October.
The price cap was increased by 54 per cent to £1,971 a year in April, reflecting sharp increases in wholesale gas and electricity prices that began last year following concerns over gas supplies in Europe. It dictates bills for more than 22mn households not on fixed-price deals and is currently recalculated twice a year.
High energy bills are contributing to a wider cost of living crisis in the UK that the Bank of England has warned will push the country into recession this year.
ScottishPower’s chief executive Keith Anderson urged Boris Johnson’s government to begin discussions immediately over how to take the pressure off those households that would be hit hardest by the October rise. Energy groups have warned that 30-40 per cent of households could end up in fuel poverty in the coming winter.
Anderson stressed it would take time to design and introduce new support mechanisms.
“What’s about to happen to people, you cannot describe in any other way than saying it’s a crisis,” he told the Financial Times.
“All of a sudden a whole host of people who have never found themselves in debt and have never struggled to pay their bills are going to get hit by this crisis. Time is running out fast. Let’s get in a room and come up with the solutions now.”
The government came under fire at the end of last year for being slow to act against soaring energy prices. Chancellor Rishi Sunak in February announced a £9bn energy support package but one of the key elements — a £200 discount to be applied to all customers’ electricity bills — will not come into force until October and is still in a consultation process on its design.
ScottishPower has proposed a “deficit fund” that would knock £1,000 off the energy bills of those most in need. This could include the 8mn-11mn households that will find themselves in fuel poverty, or those in receipt of universal credit.
Potentially costing more than £10bn in total, the fund would be recovered via a levy on all households’ energy bills over 10 years under the company’s proposals.
Anderson argued that if regulated by Ofgem, the scheme could potentially be financed by the private sector which would be able to borrow the sums required.
“Because you’re recovering it through a regulated levy . . . [retail companies] can go and securitise the debt and borrow money against that fund,” Anderson said, although he added the government could also decide to part or fully finance the scheme itself.
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Estimates of October’s expected price cap increase have varied. ScottishPower’s own forecast is subject to change as wholesale prices could decrease in the coming months. However, Anderson warned that forward prices suggested bills would not come down “in the next 12 to 24 months”.
Energy suppliers are under investigation by Ofgem after business secretary Kwasi Kwarteng said some had been increasing households’ direct debits “beyond what is required”.
Anderson said direct debit calculations could vary according to households’ energy usage but insisted the algorithm ScottishPower used was “the same algorithm we used . . . last year and the year before and the year before that”.