Electricity and gas companies on Thursday called on the UK government to “immediately” top up a £400 discount on all household energy bills this winter, warning that high prices would be “unaffordable for far too many”.
Energy UK, a trade body for the electricity and gas industry, wrote to chancellor Nadhim Zahawi warning that the non-refundable rebate was the “most simple, practical way to immediately provide broad support to customers before Christmas”.
This despite the fact that some consumer advocates have criticized the scheme, as the savings will go to all households, whether they can afford higher bills or not.
The group added that officials should “as soon as possible” start work on a government-backed loan scheme in time to limit energy bills next year, when the price cap – which covers bills for 24 million households – is predicted to rise sharply again.
The influential group’s intervention echoes similar warnings from individual suppliers that it was already “too late” to design new schemes to tame rising energy bills this autumn. Forecasts suggest the energy price cap will rise to around £3,600 from October 1 for a typical household, up from £1,971 currently.
According to the Energy Support and Advice Group, which helps people struggling with bills, households will pay around 15p per kilowatt hour for gas from October 1, up from just over 7p today. Electricity, meanwhile, will jump to almost 54p/kWh from 28p under the current cap.
Energy regulator Ofgem will announce the new level of the ceiling on 26 August.
Energy UK’s letter comes as concerns mount over the cost of living crisis. The Labor Party this week accused the government of being “asleep at the wheel” when it put forward proposals to freeze the price ceiling at its current level for six months.
Liz Truss, leader of the Conservative Party, has said she would temporarily remove some green fees added to electricity bills, but has yet to detail further measures beyond holding an emergency budget in September if she becomes prime minister.
Her rival Rishi Sunak has indicated that as premier he would use existing mechanisms to increase support for households.
In the medium term, Energy UK is backing an idea first proposed by Keith Anderson, chief executive of ScottishPower, which would see suppliers use state-backed loans to keep customers’ bills down in 2023 before recovering those costs over the next 10 to 15 the years .
However, some smaller suppliers said such an arrangement could cost them millions of pounds in interest payments.
The price cap is predicted to rise sharply again next year, with consultancy Auxilione this week suggesting it could reach £4,650 in January and £5,456 in April.
Fears about energy prices were exemplified by the resignation of an Ofgem director. Christine Farnish claimed on Wednesday that the regulator had given “too much benefit to companies at the expense of consumers” when it this month approved changes to the way the price cap is calculated, adding hundreds of pounds to household bills.
The row over the methodological changes, which allow suppliers to get the full cost of buying energy for their customers at winter’s very high prices, was the latest controversy to embroil Ofgem. It has been heavily criticized by MPs and consumer groups for exacerbating the energy crisis.
Ofgem risked courting further controversy on Thursday when it said it would not change the way the cost of bailing out customers of failed energy suppliers was recovered from household electricity bills.
These fixed costs are currently included in “standing charges” – which also cover costs for grid connections – but had been branded regressive by some campaigners, who wanted the regulator to examine the link of costs to usage.