The global surge in natural gas prices is likely to keep energy bills elevated until 2023, suppliers warn, as they urge the government to provide relief to struggling households and financially-hit companies.
An unprecedented surge in wholesale gas prices has toppled 26 British energy suppliers this autumn and will likely push the price cap that limits household bills by more than £700 over £2,000 per year when it is next adjusted in April. But 2022 won’t spell the end of households’—and energy suppliers’—pain.
Several large suppliers have cautioned that when consumer prices are set by Ofgem for the winter of 2022-2023, they will likely climb still higher. EDF Energy, Britain’s fourth-largest supplier, told the Financial Times that between October 2022 and April 2023, the cap could “easily” exceed £2,000 annually.
“We are looking at increases until at least 2023,” an executive at another top six energy supplier said.
Financial services company Investec forecasts that bills will hit £1,995 in April before soaring still higher in October. They note that some fixed-price tariffs currently available—exempt from the price cap, which only limits standard variable tariffs—are set at nearly £3,000 for a year.
Martin Young, an analyst at Investec, said: “Directionally, we could see further upward pressure on household energy bills come October 2022.”
“This has now moved from an energy supplier crisis to a cost of living crisis,” he added.
A source who spoke to the Telegraph was even more pessimistic, warning that the cost of energy will be £20 billion higher than a typical year. This would lead to “doubling or trebling of bills” next year.
“There is a growing sense in the government that they have to do something,” the source added, suggesting that the costs should be spread over several years to cushion the blow.
However, a virtual summit between business secretary Kwasi Kwarteng, regulator Ofgem, and heads of the country’s largest energy suppliers on Monday ended without agreement on action.
Energy suppliers are pushing for several solutions, including removing the 5% VAT charge on energy bills; removing levies from bills that subsidise renewable energy; government-guaranteed loans that would allow to spread the cost of wholesale price rises across a longer period to limit the impact on bills without jeopardising their own viability; and increases in support for vulnerable households.
Dale Vince, founder and chief executive of green supplier Ecotricity, has called for “a windfall tax on the profits of North Sea oil and gas production to pay for the costs of the energy crisis.”
Those fossil fuel companies are poised to make massive returns due to the spiral in wholesale prices. Serica Energy, responsible for 5% of UK gas prices, has promised shareholders “very significant returns.”
Labour has backed calls for suspending the VAT on energy bills this winter, noting that the surge in prices will hand the Treasury £3.1 billion more than expected this winter.
Fuel poverty charity National Energy Action (NEA) has joined the calls for government intervention, noting that “this is a train wreck that we’ve seen coming for months,” in the words of chief executive Adam Scorer. It’s time for the government to “step in and support those who will be battered hardest by an inevitable price storm," he added.
Wholesale gas prices fell to 275p per therm this week, from a record high of 450p/therm hit earlier in the month. But they remain nearly five times higher than at the start of 2021.
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