Energy bosses have urged the chancellor to provide new financial support to customers and businesses as the war in Ukraine threatens to deepen the crisis which has engulfed the industry during the last six months.
Sky News has seen a letter from Energy UK to Rishi Sunak in which it laments the use of energy “as a geopolitical weapon” and expresses deep concerns about repeated spikes in prices.
The trade association – which counts the likes of British Gas-owner Centrica among its members – said it was “not concerned about UK security of supply” because of Britain’s low dependence upon Russian gas imports.
2:18 Why the global economy will have to be weaned off Russian energyHowever, it warned Mr Sunak that he may need “to act to provide extra measures to protect the UK economy and support households and businesses with the costs of energy”.
Last month, the Treasury unveiled a £9bn support package to help households cope with a surge in gas and electricity prices, but that has already been judged insufficient by analysts in the wake of subsequent wholesale costs.
Advertisement“Volatility in the international gas market in 2021 had already seen wholesale gas price spikes of up to 500%, 29 UK retail energy suppliers exit the market, and an energy bill rise this April which we estimate will put an additional 1 million UK households into fuel poverty,” said the letter from Emma Pinchbeck, Energy UK’s chief executive.
“Following the invasion of the Ukraine, we have seen further spikes in prices, as the markets respond to uncertainties, and industry and governments around Europe seek to move away from gas dependency at speed.”
More from BusinessMs Pinchbeck said the industry was working with charities and consumer groups, spending millions of pounds to support vulnerable customers, and working with Ofgem, the energy regulator, and the Department of Business, Energy and Industrial Strategy on proposed reforms to retail regulation.
She added that Energy UK members were “making sure that they limit exposures to Russian gas, prioritising investments in domestic clean power, and working closely with government on how best to support European security of supply at this time”.
1:36 PM challenged on energy bills by StarmerThe industry could not, however, absorb the costs of the crisis alone, she told Mr Sunak, saying that energy retailers were now subsidising some customer accounts by up to £700.
Ms Pinchbeck said the bill for supplier failures so far was at least £2.6bn, adding £68 annually to customers’ bills, with any further companies failures adding further to that burden.
Sky News revealed earlier this week that the collapse of Bulb was by itself now expected to cost taxpayers £3bn or more after the government told the company’s special administrators that they could not hedge wholesale gas purchases.
“The market conditions look to be outpacing the welcome support that you provided, with some forecasting average bills of £3,000 this autumn, and we can see the costs and risks to the economy – including inflationary impacts – running into 2023,” Ms Pinchbeck warned Mr Sunak.
She called for talks with the chancellor ahead of his spring statement on 23 March, with indications from ministers in recent days that further help for struggling households is likely to be considered.
Next week, Boris Johnson is expected to outline a new energy independence strategy for the UK that could pave the way for a return to fracking and a wave of new North Sea oil and gas exploration licences.