As energy price cap rises, British Gas advocates bill freeze and profit donations
Ofgem has confirmed today (26 August) that the domestic dual-fuel price cap will rise beyond £3,500 in October. In the meantime, energy providers including Octopus and British Gas are calling for more policy intervention.
Under Ofgem’s new price cap, from 1 October 2022 to 31 December 2022, homes using both electricity and gas will see their annual bills capped at £3,549. This is an increase of almost 80%. The cap covers around 23 million of Britain’s 28 million homes.
The cap has already increased once this year. In April, it rose by 54% to £1,974, in reflection of the sharp increases in wholesale gas prices across Europe and beyond. The price crisis has already caused more than 25 UK energy suppliers to go bust, including Bulb.
Ofgem confirmed earlier this month that the price cap changes, which have previously been possible every six months, can now be adjusted every three months. As such, customers can expect further price hikes into 2023.
Prime Minister Boris Johnson has repeatedly stated that he and Chancellor Nadim Zahawi will not confirm any further interventions on support with bills, energy efficiency or energy generation before his successor is elected in early September. Both candidates have focused on the price crisis during TV debates and hustings but neither has proposed a set manifesto for solving the challenge.
As the nation waits to find out whether Liz Truss or Rishi Sunak will be the next Conservative Party leader and Prime Minister, some of the UK’s biggest energy suppliers are proposing additional policy interventions and making their own changes to ease costs for bill-payers.
It has been reported that, after a meeting between Ministers and energy industry decision-makers earlier this month, five companies are supporting proposals to freeze customer energy bills at their current rate for two years. ScottishPower and E.ON first proposed this idea, and various media outlets are now reporting that British Gas, EDF and Octopus Energy are also supportive.
The proposal involves the creation of a ‘deficit fund’ to help energy firms cover the difference between the price cap and the wholesale price of energy. This fund would combine government money with money from the private sector.
The general public would then repay the fund costs over a period of ten or more years, through a new levy on bills. Borrowing could, by EDF’s estimates, reach up to £100bn.
ScottishPower’s chief executive Keith Anderson has publicly stated that the plans have been presented to the Department for Business, Energy and Industrial Strategy (BEIS).
A spokesperson for BEIS could neither confirm nor deny this statement. The Department has reiterated that it has already proposed some £37bn of support for households in the form of help towards bills and energy efficiency incentives.
edie has reached out to E.ON, EDF, British Gas and Octopus for their comments on a potential bill freeze.
An E.ON spokesperson said the firm “is are broadly supportive of a tariff deficit mechanism as a way of helping customers during this unprecedented crisis”. We will update this article as and when other companies respond.
Also this week, British Gas has confirmed that it will donate 10% of all profits made through its home energy division to vulnerable customers “for the duration of the energy price crisis”.
It will, in the first instance, make an additional £12m of grants available through its Support Fund. The Fund will enable the allocation of grants to customers already facing fuel poverty and those at risk of falling into fuel poverty. Each home should receive an average of £750.
British Gas recorded a record £98m in pre-tax profits for the first half of 2022 through British Gas Energy. Overall, Centrica announced a five-fold increase in profits to £1.3bn for the half.
“The current cost of living crisis requires all of us to think differently,” said Centrica’s chief executive Chris O’Shea. “As a responsible business we want to do more to support our customers during this difficult time.”
“This increased investment in supporting our customers adds to the financial support and advice we already offer and ensures more grants will be available as we go into this winter.”
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