UK energy groups call for ‘immediate’ increase in £400 bills rebate scheme

Electricity and gas companies on Thursday urged the UK government to “immediately” top up a £400 rebate on all households’ energy bills this winter, warning that soaring 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-repayable rebate was the “most straightforward, practical way to immediately provide broad support to customers ahead of Christmas”.

This is despite the fact that some consumer campaigners have criticised the scheme, as the saving will go to all households, whether or not they can afford higher bills.

The group added that officials should “urgently” start work on a government-backed loan scheme in time to limit energy bills next year, when the price cap — which dictates bills for 24mn households — is forecast to increase drastically again.

The influential group’s intervention echoes similar warnings from individual suppliers that it was already “too late” to design new schemes to tame spiralling energy bills this autumn. Forecasts suggest the energy price cap will rise to roughly £3,600 from October 1 for a typical household, up from £1,971 at present.

According to the Energy Support and Advice Group, which helps people struggling with bills, that would see households pay about 15p per kilowatt hour for gas from October 1, up from just over 7p at present. Electricity, meanwhile, would jump to nearly 54p/kWh from 28p under the current cap.

Energy regulator Ofgem will announce the new level of the cap on August 26.

Energy UK’s letter comes as concerns mount over the cost of living crisis. The Labour party this week accused the government of being “asleep at the wheel” as it set out proposals to freeze the price cap at its current level for six months.

Liz Truss, Conservative party leadership frontrunner, has said she would temporarily scrap some green levies that are 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 government-backed loans to keep customers’ bills down in 2023 before recouping those costs in the next 10 to 15 years.

However, some smaller suppliers said such a scheme could cost them millions of pounds in interest payments.

The price cap is forecast to rise sharply again next year, with the consultancy Auxilione this week suggesting it could hit £4,650 in January and £5,456 in April.

Fears over energy prices were exemplified by the resignation of an Ofgem director. Christine Farnish on Wednesday claimed the regulator had given “too much benefit to companies at the expense of consumers” when it approved changes this month to the way the price cap is calculated, adding hundreds of pounds to households’ bills.

The row over the methodological changes, which allow suppliers to recover the full costs of buying energy for their customers at this winter’s very high prices, was the latest controversy to embroil Ofgem. It has been fiercely criticised by MPs and consumer groups for compounding the energy crisis.

Ofgem on Thursday risked courting further controversy when it said it would not change the way the costs of rescuing customers of failed energy suppliers were recovered from household electricity bills.

Those fixed costs are at present included in “standing charges” — which also cover grid connections costs — but had been branded regressive by some campaigners, who wanted the regulator to investigate linking the charges to usage.