Energy bills are set to soar to almost £3,000 by the end of the year, leaving millions at risk of ruin, the boss of one of the UK’s biggest suppliers has warned.
Around 40% of UK households could be in fuel poverty this winter, the chief executive of Scottish Power has said. He said: “We’re heading to a horrible place where none of us want to be.”
Keith Anderson called on struggling households to see their energy bills cut by £1,000 in October and said the Government’s plan to give each household £200 towards their energy bill would not be enough. He told the BBC that another expected rise in energy bills of between £2,500 and £3,000 a year could leave many customers unable to pay their bills.
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Meanwhile, suppliers could see “huge losses”, MEN reports. He said: ‘We have to be realistic about the seriousness of the situation – around 40% of UK households, potentially 10 million homes, could be in fuel poverty this winter.
The price cap, which rose 54% in April, is expected to rise again in October. The government revealed in this year’s spring statement that it will offer help in the form of a £150 payment through the council tax system in England, and in October customers in England, Scotland and Wales will receive a £200 rebate on their energy bills. .
People will have to repay the rebate, at £40 a year for five years, starting in April 2023. Mr Anderson said a £10billion tariff reduction fund could be funded by adding £40 per year to all household energy bills for the next decade. He said it would be the most effective way to avoid fuel poverty for the most vulnerable, reports the BBC.
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Mr Anderson said such a fund would directly tackle the root cause of the cost of living crisis, unlike other measures. Households using prepaid meters and those receiving benefits would be eligible for the rebate.
Mr Anderson also said more energy companies could collapse if their customers were unable to pay their bills. Scottish Power is owned by Spanish company Iberdrola, and Mr Anderson fears that foreign energy suppliers will find it difficult to persuade their parent companies to continue subsidizing loss-making UK subsidiaries and exit the UK market.
If Ofgem does not recognize this when setting the new cap, some companies will have to sell at a significant loss, threatening them with further distress or collapse which would further destabilize the market, according to Scottish Power.
Mr Anderson added: “We need to find a way to help those who need it in time for winter in a way that does not exacerbate the problems we have already seen in the industry with the failures of the suppliers and the very real concerns about bill payers running up unsustainable debt,” Mr. Anderson continued.
Ofgem responded that it is “too early” to predict the price cap level from October. However, it said new measures earlier this year will allow it, in “exceptional circumstances”, to update the price cap more frequently than once every six months, to “ensure that the price cap prices continue to reflect the true cost of energy supply”.
Ofgem added: “This has been introduced in the interest of stabilizing the market and ensuring consumers and suppliers pay a fair price.” The Treasury said it was monitoring the situation and would revisit the level of support needed when the level of the new price cap becomes clear in late summer.