Industry executives warn a jump in the UK’s domestic energy bills in April will likely coincide with falling global gas prices, creating a “major” political challenge. big” unless ministers urgently put in place measures to ease the pressure on household finances.
Emma Pinchbeck, chief executive of trade body Energy UK, said on Thursday that a expected 50% increase in the UK energy price cap to £2,000 a year per household would kick in. same as regular seasonal wholesale gas discounts. prices in the spring, due to reduced demand.
The limit stipulates bills for the majority of British households and is set twice a year by regulator Ofgem. The next level will be set on February 7 and take effect from April. But it is calculated using historical wholesale prices, which creates a lag between the wholesale market price and the fee charged by consumers. consumer pay.
Ministers have been locked in talks with energy companies for several months to find out how the government can help reduce the impact of the bill increase on households. Pressure is growing on the government to solve the problem cost of living crisis when inflation is high. Households will be hit hardest from April with an increase in energy bills coinciding with a tax hike.
“Our bills will go up in the UK as global gas prices fall,” said Pinchbeck, head of the trade body representing suppliers, which includes Centrica, Eon UK, EDF Energy and ScottishPower. .
“You can see why politically it can be a huge challenge and something difficult for us. [as suppliers] to explain to customers,” Pinchbeck said in an online event organized by the Climate & Energy Advisory Group.
“I think it is unacceptable for the government not to do something about the bills, and point out that it’s not just the rising bills that will push many households into poverty,” she said. , but also has a large impact on inflation and the cost of public debt.
Goldman Sachs has predicted inflation to hit 6.8% year-on-year in April, when the cap goes up.
The government has considered various interventions, including a 5% value-added tax rate cut on energy bills and the removal of “green” revenues that fund renewable energy policies. generated from invoices. But it may choose to only provide limited support to the most vulnerable households.
Other options include state-backed loans to energy companies to reduce customer fees or Involvement on the wholesale market to stabilize prices.
Pinchbeck said the government could initially take the simplest route and cut bill costs, possibly by expanding the Warm Home Rebate program, which aims to lower bills for households that are easy most vulnerable, before February 7. But she thinks it will take longer to implement any of the more complex proposals.
Nigel Pocklington, chief executive of green energy supplier Good Energy, agreed that expanding the Warm Home Rebate Scheme was one of the more likely options for ministers, although he warned that the plan This plan is funded by other households through their energy bills.
Pocklington said ministers should be clear whether bill payers would have to pay any extra costs for the scheme or whether it was “best met through a common tax”.
The government says it has supported vulnerable households but recognizes the pressures residents are facing with rising costs of living. “We will continue to listen to consumers and businesses about how to manage energy costs,” it added.