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Scottish Power, one of the UK’s largest energy companies, has proposed a £100billion plan to freeze customers’ energy bills for two years amid soaring costs.
The scheme, understood to also be backed by British Gas owner Centrica and Octopus Energy, aims to create a multibillion-pound emergency funding package over the next decade for struggling families.
The latest rise in Ofgem’s price cap is set to be announced on Friday, and is expected to increase from £1,971 to £3,576 a year for typical users.
But new forecasts by Cornwall Insight have suggested that the price cap could top £5,300 next April – a 170 per cent increase on the current £1,970 price cap – as energy experts warn of a catastrophic winter for UK households.
Ofgem’s energy price cap rose to £1,970 in April, as forecasts predict the cap could rise to £3,576 in October, with some suggesting this could rise as high as £6,000 next summer
Scottish Power’s chief executive, Keith Anderson, presented the plans for the support package to UK Business Secretary Kwasi Kwarteng.
It would involve the Government guaranteeing loans to the energy companies to help vulnerable customers.
Anderson said that the UK government was ‘seriously considering’ the proposal.
It would enable firms to freeze customers energy bills to keep buying the gas needed for the next two years without raising prices.
The tariff deficit fund would then be repaid through an overall rise in bills over the next 20 or so years, according to the chief executive.
| April 2022: £1,971 | October 2022: £3,582 | January 2023: £4,266 |
|---|---|---|
| £1,000 | £1,820 | £2,160 |
| £1,500 | £2,730 | £3,240 |
| £2,000 | £3,640 | £4,320 |
| £2,500 | £4,550 | £5,400 |
| £3,000 | £5,460 | £6,480 |
| £3,500 | £6,370 | £7,560 |
| £4,000 | £7,280 | £8,640 |
| Source: This is Money, based on Cornwall Insight energy price cap forecasts 9/8/2022 | ||
Anderson said: ‘We’ve been through all of the details with the current chancellor and other members of the Cabinet as well and I think this is being seriously considered.
‘I think it’s being looked at as probably one of the best ways of dealing with the issue in the short term, in the short to medium term. But the Government will also look at other options.
‘The first and most important thing is to protect customers, to stop this price hitting customers’ bills.
‘And if we can all agree on that, that sends a very powerful message to the UK Government.’
Like businesses, schools are not protected by the energy regulators price cap on household energy bills, and are expecting to face big hikes in prices.
Schools could send children home to cut bills
The Government has also warned schools in England not to send children home to save on energy costs this winter, after reports that some were considering switching to one or two virtual school days a week to afford their energy bills.
A headteachers’ union said that schools were unlikely to bring in shorter weeks, but other cuts were possible amid soaring energy bills.
Schools were hit hard by Covid-19 lockdowns, but have considered returning to virtual learning this winter as some say they may not be able to afford rising energy bills
Unions suggest this could mean bigger class sizes or delays to building projects.
Centrica and Octopus Energy, two of the bigger energy firms, are said to be backing the emergency fund, with Eon energy presenting a similar plan to parliament.
Philippe Commaret, managing director for customers at supplier EDF, has said the UK faces a ‘dramatic and catastrophic winter for customers’.
He added that ‘half of the UK households might be in fuel poverty’ by January 2023.
EDF has said it will be reaching out to 100,000 of its most vulnerable customers to help them find ways to cut energy bills and how to access support.
Energy experts have warned that half of households could be in fuel poverty by winter
Commaret warned that EDF would incur losses this year: ‘So for the time being we are doing everything we can do in order to help customers.
‘But we need also the support of the Government in order to step in and even to help beyond what has been already announced.’
Commaret said proposals for the tariff deficit fund should be investigated, as well as a cut in VAT, given that tax receipts had increased as prices had risen.
He added that it is crucial to ‘create headroom in the budget of our customers’ to repay the money by helping customers use less energy in the long term.
A UK Government spokesperson said: ‘We know the pressures people are facing with rising costs, which is why we have continually taken action to help households by phasing in £37 billion worth of support.
‘In the immediate term, we are giving a £400 discount on energy bills over winter and eight million of the most vulnerable households will see £1,200 extra support, provided in instalments across the year.
‘We have provided an extra £82 million for the Scottish Government to help vulnerable families at their discretion. This is in addition to the significant income tax and welfare powers they already have.’
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