A leading energy trade association has written to the Chancellor of the Exchequer, setting out proposals for cutting the cost of energy for businesses and households.
Energy UK wants the government to introduce a deficit tariff scheme to protect energy consumers, until broader wholesale market reform can be brought forward. This approach would look to lower and stabilise prices for consumers through 2023 by using government-backed loans to smooth rising wholesale costs for domestic and non-domestic consumers over a longer period of time.
Under the plan, commercial banks would put cash into the state-backed fund, which suppliers could then draw on to stabilise consumer bills. The cost of the scheme would then be paid back over 10 to 15 years through a surcharge on bills or via taxation.
The trade body is also calling for the establishment of an expert energy panel to look at ways of keeping bills affordable for both domestic and non-domestic customers over the longer term and is also asking the government to consider setting up a new dedicated Department of Energy. The previous Department for Energy and Climate Change was abolished under Theresa May’s government in 2016, and moved into the Department for Business, Energy and Industrial Strategy (BEIS).
Prices set to rise further
High prices are set to persist throughout 2023, with further big increases predicted for January and April. In the letter, Dhara Vyas, Director of Advocacy and Programmes at Energy UK says: “International gas prices remain high, and a return to pre-crisis price levels is unlikely in the near term, with the Bank of England forecasting gas prices over six times higher than their 2010-19 average until at least 2024. As you know, the contraction by 0.1% of the UK economy in the three months to June is largely being attributed to increasing energy and fuel prices, with no immediate change forecast for some time to come.”
Energy UK is also calling for greater support for households, with the next price cap (which comes into force at the start of October) predicted to exceed £3,500 (rising from the current £1,971). It is urging the government to increase the amount that will be provided by the Energy Bills Support Scheme – up from the current £400.
Dhara Vyas said: “The crisis we are facing will impact every household and business in the UK as much as the COVID pandemic and constitutes a similar national emergency. Our recommendations will tackle the immediate crisis for households and urgently bring forward proposals to ensure long term reform as we move towards net zero.”
