All energy companies, including oil and gas producers, should pay into a multibillion pound fund to subsidise electricity and gas bills from April, when blanket UK government support ends, one of Britain’s biggest utilities has said.
ScottishPower chief executive Keith Anderson proposed the fund to ensure millions of households’ energy bills continue to be discounted after the spring, when they are on average set to top £4,000 a year.
New chancellor Jeremy Hunt on Monday announced the government would row back on outgoing prime minister Liz Truss’s pledge to limit typical yearly household bills to £2,500 for two years.
Instead the government scheme — which caps the price per unit of electricity and gas that suppliers can charge and whose cost had been estimated at £150bn — will apply to all households only until April.
Beyond that, Hunt said funding would be reviewed with the aim of targeting it at “the most vulnerable”.
Anderson told the Financial Times the two-year protection for all households would have resulted in the Treasury writing an “open-ended blank cheque . . . that quite frankly the country can’t afford”.
He added that an energy company-backed fund, which would be part-funded by public money, could replace other “rushed” policies. These include a windfall tax on oil and gas producers introduced in May and the revenue cap on low-carbon electricity generators, which was confirmed by the government last week.
The tax has been widely attacked for enabling oil and gas companies to take advantage of a generous investment allowance and reduce their tax bills if they press ahead with new drilling projects.
Anderson said the cap meanwhile did not apply to “half of the [electricity] generation sector”, such as gas-fired power stations, which have been boosted by the sharp rise in wholesale power prices since Russia invaded Ukraine.
“There’s a need for all of us . . . oil and gas companies, upstream companies and every generator to sit in a room with the government and talk about how we contribute to [a] fund,” said Anderson. He added that the government should “pause, draw breath, stop running individual schemes” and consider how the energy sector “in its entirety” can help households.
He called for any fund to prioritise roughly 10mn of the most vulnerable Britons, and said energy groups and the Department for Work and Pensions would have to work together to identify people receiving universal credit and other benefits.
But energy companies are also keen to help middle-income households, which will struggle to pay their bills next year without help. Previous suggestions of how to do this include restricting the number of subsidised units of energy customers receive, as wealthier households tend to use more.
Greg Jackson, founder and head of Octopus Energy, told the Financial Times Energy Transition Summit on Wednesday that “we have to be very careful that we don’t end up assuming this is a problem just for the lowest income households”.
“It’s colossal for them but it’s also a problem for middle income households who are also by the way facing 14 per cent food inflation and potentially huge rises in mortgages,” he added.
ScottishPower has been credited as the architect of this winter’s energy bills support, after Anderson put forward a loan scheme in April to tackle the crisis.
Additional reporting by Shotaro Tani in London