Power companies join clamour for government action on energy bills

Call for urgent action on ‘cataclysmic’ price hikes to avoid damage to mental health

(Getty/iStock)

Utility companies – including one of the “big six” domestic energy suppliers – have joined the chorus of demands for Tory leadership contenders Liz Truss and Rishi Sunak to set out an improved package of help for consumers facing astronomical bills this winter.

The call from EDF and other suppliers came as Money Saving Expert Martin Lewis said that immediate reassurance over the “cataclysmic” price hikes was needed to avoid mental health damage to millions of people.

Chancellor Nadhim Zahawi and business secretary Kwasi Kwarteng will meet on Thursday with electricity generating companies, who are making massive profits as a result of sky-high global gas prices.

The ministers will push companies for action to ease pressure on consumers. But insiders said no new package of assistance was expected, as Boris Johnson has ruled out any major fiscal announcements until the new prime minister is in place on 5 September.

With Mr Johnson accused of leading a “zombie” government during the long wait for the Tory leadership battle to conclude, neither Ms Truss nor Mr Sunak have yet explained how they will help consumers deal with domestic energy bills expected to top £3,500 in October and £4,200 in January.

In what Mr Sunak’s team branded “a major U-turn on the biggest issue currently facing the country”, Ms Truss backed down on her previous opposition to “handouts”, stating that “if elected I will do all that I can to help struggling households”.

But the foreign secretary made no specific commitment to direct payments of the kind deployed by Mr Sunak earlier this year.

She said that her “first port of call” remains tax cuts, which experts warn will be of no help to the most disadvantaged households.

Mr Sunak suggested that any support package he implements as PM will amount to no more than “a few billion” – well short of the £15bn-plus which poverty charities and experts believe is needed.

Asked by BBC interviewer Nick Robinson whether new support would be worth “a few billion pounds (or) over £10bn”, he replied: “Much closer to the former than the latter of what you’ve said… because that’s the scale of the problem we’re talking about”.

Mr Sunak said that average bills were expected to be around £400 higher than when he announced his earlier package in May, and that he felt a “moral responsibility” to respond with additional help.

He indicated that there would be increased cash support for pensioners, benefit claimants and the disabled as well as a universal payment for all households, but refused to say how much they would be worth.

Treasury chief secretary Simon Clarke said the government was drawing up “a package of cost of living support that the next prime minister can consider when they take office”.

The Independent understands that this involves drawing up plans for a wide range of options – which could include tax cuts, enhanced payments or new levies on producers – rather than a finalised package for the new PM to implement.

Responding to Ms Truss’s comments, a Sunak aide said: “It’s all very well offering empty words about ‘doing all you can’, but there aren’t lots of different ways to act on this. Taking action means providing direct support, which Truss had previously dismissed as ‘handouts’.

“Twice now, Truss has made a serious moral and political misjudgement on a policy affecting millions of people, after last week reversing plans to cut the pay of teachers and the armed forces outside London. Mistakes like this in government would cost the Conservative Party the next general election.”

In a sign of mounting industry concern over customers’ ability and willingness to pay ever-rising bills, EDF managing director of customers Philippe Commaret said that the outlook for prices had changed “dramatically” since Mr Sunak’s £15bn cost of living support package was unveiled in May.

“Sadly, the support previously announced will simply not go far enough,” Mr Commaret told Bloomberg.

“We are asking government and the two Conservative candidates to work with industry so we can find a viable solution for those customers most in need this winter.”

A Savanta poll for The Independent found that 7 per cent of customers say they have already stopped paying their bills in full or in part, while 19 per cent more said they were considering doing so as prices rise. A majority (55 per cent) said that an organised boycott of energy payments would be justified.

And website Uswitch said that 6m homes across the UK owe an average of £206 to their energy provider, up from an average £188 in April.

Meanwhile, government officials have drawn up an emergency energy plan including the potential for blackouts this winter, in a “worst-case scenario” which the Department for Business, Energy and Industrial Strategy (BEIS) said was “not something we expect to happen”.

Octopus Energy chief executive Greg Jackson said: “If the £15bn package was right previously, then clearly it’s not sufficient now and we need to look at similarly significant assistance from the government for this winter.”

And Utilita Energy chairman Derek Lickorish, former chair of the government’s committee on fuel poverty, called for a French-style social tariff to cut the bills of 10m fuel-poor households by £800 to £1,000.

“We have to do something very profound, we have to do it quickly because all the time we’re sitting here the clock is ticking and the price of gas keeps on increasing,” said Mr Lickorish.

“It has to be a properly-funded social tariff by the Treasury. That will cause more borrowing but is essential if we are to take the stress out of it for the poorest.”

Energy retailers are facing a squeeze despite rising prices, because of the sky-high cost of gas on the global markets. Fears of more suppliers going bust are behind regulator Ofgem’s decision to allow the price cap to rise so fast.

Thursday’s round-table with electricity generators will focus on long-term reforms, tabled by Mr Kwarteng earlier this year and currently under consultation, to make the electricity market work better.

Mr Zahawi indicated that this could include an end to the “renewables obligation” system under which some wind and solar energy producers have their prices linked to gas, resulting in inflated profits even though they face no rise in costs.

“I want to understand what they can do for their customers, what more they can do, because they’re clearly in a place now where they’re making very large profits because of that peg to the gas price,” he said. “I want to challenge them, to say ‘Are you making the investment? How can you help your customers? What more can we do together?’”

Labour called on ministers to scrap a loophole in the £5bn windfall tax that provides energy companies billions in tax breaks.

The 25 per cent charge on extraordinary profits from North Sea oil and gas extraction, announced by Mr Sunak earlier this year, grants the firms a 91p tax saving for every £1 they invest in the UK’s energy sector.

Shadow chancellor Rachel Reeves said: “The Tories are handing oil and gas giants billions in tax breaks, just for them to pass it on to shareholders.

“The government should be ashamed this loophole existed in the first place. This isn’t right at a time when people are worried sick about how they’ll pay their bills.”

But a Treasury spokesperson said: “Our tax regime ensures the oil and gas industry pays billions in taxes every year, which in turn go towards paying for our vital public services. And we expect our newly introduced Energy Profits Levy to raise an extra £5bn its first year to help pay for our £37bn package to help families with rising costs.

“However, with Putin’s invasion of Ukraine pushing up energy prices globally, it is right we encourage North Sea investment – which will be crucial for the UK’s domestic energy supply and security for the foreseeable future.

“Like other countries, our system also provides relief where there are genuine costs to the industry, such as safely removing infrastructure from our natural environment.”