Government to hold emergency meetings with bosses of UK’s biggest energy suppliers, after suppliers warned Thursday of a ‘national crisis’ that could lead to more than 50% rise in bills to £ 2,000 per year.
Business secretary Kwasi Kwarteng is due to hold virtual meetings with energy suppliers on Monday, pushing the government to step in to mitigate unprecedented increases in consumer bills caused by soaring wholesale gas prices.
The energy industry believes the crisis, in which more than 26 energy suppliers have gone bankrupt at a cost of £ 1.8bn to date, could be made more manageable if the government removed 5% VAT on invoices imposed when the UK was part of the European Union.
Other interventions the industry would like to see considered include extending fuel subsidies and shifting green levies from consumer bills to taxation.
Trade body Energy UK said on Thursday that consumers can expect their bills to climb by up to 50% from April 1.
As wholesale prices continue to soar, the UK’s price caps on energy bills are preventing companies from immediately passing these costs on to their customers.
The price cap, set by the industry regulator Ofgem, has hit a record £ 1,277 since 1 October. Ofgem is expected to raise the cap significantly on April 1. EDF has said the cap could reach £ 2,000 by next October, when the cap will be revised again.
Investec analysts estimate that the expected increase in the bill in April would add 1.8 percentage points to inflation next year.
Shadow Energy Minister Ed Miliband on Thursday called on the government to prevent families from being ‘crushed’ by rising heating and electricity costs for their homes, by removing VAT from bills during six months.
Spain has reduced energy taxes, while Germany has reduced green levies on household bills, intended to support the development of renewable energies.
But Energy UK said such measures would save less than £ 300, significantly less than the expected £ 600 increase in the average annual bill when the price cap increases.
A plan being formulated by the energy industry would involve a government-administered loan program to spread the impact of price increases over several years.
The plan would involve one or more commercial lenders – such as banks – covering the immediate cost of purchasing power in wholesale markets at record prices, with a sum of at least £ 7 billion. The loans would not require a government guarantee, but officials would be responsible for ensuring repayments.