Scottish Power, one of the country’s largest energy providers has warned that yearly bills could jump by more than £900 this year, and has urged the government to join emergency discussions to address the “crisis” of growing electricity and gas prices.
ScottishPower predicted that the UK’s energy price cap will rise by around 47% to an average of £2,900 per family when it was next modified by regulator Ofgem in October.
We have already seen the cap raise by 54% to £1,971 per year, following high rises in wholesale gas and electricity costs that began last year in response to worries about European gas supply. It determines bills for more than 22 million non-fixed-price families and is now updated twice a year.
It is yet another concern for families currently dealing with the cost-of-living crisis, with inflation likely to hit 10% shortly, leaving households facing the second-largest economic squeeze since records began in 1964.
Food and clothing prices have already risen, while mortgages and rail fares are set to rise considerably, with four out of ten individuals already reporting that they are having to cut back on food to make ends meet.
Keith Anderson, CEO of Scottish Power spoke to The Times and said this:
‘It will hit incredibly hard and immediately. If nothing else happens by October, I think we will see a huge increase in pre-payment customers in effect self-disconnecting – not re-loading their pre-payment meter because they can’t afford to do it.
‘We will also see a massive increase in debt levels for direct debit customers, and a massive increase in people being pushed from direct debits to prepayment meters so that companies can recover the debt.
‘We are heading to a really horrible place where none of us want to be.’
He has also urged the Government to step in and take further action by slashing £1,000 off each household’s bill when this rise comes into action.
“We need to be realistic about the gravity of the situation – around 40% of UK households, potentially 10 million homes, could be in fuel poverty this winter,” Mr Anderson explained.
Mr Anderson, on the other hand, said that a £10 billion tariff reduction fund could be paid for simply adding £40 to all family energy bills over the next decade. He said that this would be the most effective way to keep the most vulnerable people out of fuel poverty.
Mr Anderson stated that such a fund would address the root cause of the cost-of-living issue in a manner that other initiatives, such as the recent 5p reduction in fuel duty or a hypothetical reduction in the frequency of MOT testing, would not.
Households won’t be the only ones hit hard though.
Many energy providers purchased the gas they will supply this winter at substantially higher costs than the present market.
According to Scottish Power, if Ofgem does not recognize this when setting the new cap, some enterprises may be forced to sell at a large loss, threatening them with additional hardship or failure, further destabilizing the market.
“We need to find a way to aid people who need it in time for winter but not exacerbating the challenges we’ve already seen in the business with supplier failures and very serious worries about billpayers incurring unsustainable debts,” Mr Anderson added.
What help is there currently for households?
The government is giving some assistance in the shape of a £150 council tax rebate this month, as well as a £200 loan in October, however this is expected to be repaid over the next 5 years.
Many have argued that this is far from enough, and will be insufficient to safeguard millions of people from having to choose between heating and eating.
There are also other schemes, which you can find the full list here of, including things like the Warm Home Discount Scheme, Winter Fuel Payment, Cold Weather Payments & other Grants listed here.