Energy bosses in the UK have called for the price cap to be scrapped in order to protect households from an upcoming ‘horrific’ winter. The biggest UK energy suppliers have voiced their concerns, requesting a new system to be put into place and the price cap to be abolished.
These unprecedented measures come after record rises in energy prices, with vulnerable households being hit the hardest. With a fuel poverty crisis looking more likely, decisions need to be made by the government to support homes across the nation.
Currently, pre-payment customers are still reeling from the effects of rising bills, with numbers only expected to rise when the latest price cap is announced in October. It is estimated that there will be further increases issued.
In April, the price cap rose by £693 per year on average, a record here in the UK. However, pre-payment customers are typically the most vulnerable customers. will be facing an even bigger increase next winter.
Calls for the price cap to be scrapped for a more social tariff have been raised by ScottishPower chief executive Keith Anderson. The Business, Energy and Industrial Strategy (BEIS) committee heard the boss discuss how the price cap had led to dozens of competitors failing.
A record number of energy firms went bust over the last few years due to not being able to pass on huge rises in raw energy costs to customers. A new price cap would see the better off paying more.
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Other suggestions included a deficit fund. This fund would be set up to support those who are deemed as struggling. A 10 year period would be given to these customers to pay off £1,000 on their bills.
E.ON boss Mike Lewis also spoke about the issues facing families, as from October, up to 40% of households could be facing fuel poverty due to rises in energy use and further adjustments to the price cap.
There was support for the social tariff, however, calls for the government to take action were raised. In addition to the energy loan and Council Tax rebate, more needs to be done, such as short term removals of green levies and VAT.
British Gas owner Centrica, had their boss Chris O’Shea discuss the rises in prices. In just the past 12 months, 125,000 households had been placed in debt, with a total of 715,000 people owing money to British Gas.
This number is only likely to climb, especially after the impact of the October announcements. Predictions from industry specialist Cornwall Insight have forecasted an almost £500 soar to the average annual bill.
Prices have risen further after the global impact of wholesale energy costs since Russia’s invasion of Ukraine. The new rises would leave the average annual bill beyond £2,450.
Russia’s ongoing war has made the cost of living a lot worse for European nations, with the global economy seeing steep increases. Just the UK alone is currently witnessing 30-year highs in inflation. There hasn’t been a larger drop in living standards since the 1950s.
Along with skyrocketing energy bills, food prices have also seen spikes, like with the current energy industry turbulence. Combine this with Russia and Ukraine producing roughly 15% of the world’s wheat and other goods, the situation looks bleak.
Inflation is expected to peak at 9% according to the OBR, however, double-digit figures can not be ruled out. With families facing the startling decision between eating or heating from October, there needs to be a quick solution.