Energy bills could rise as much as 50% in the spring as the UK faces a “national crisis” over soaring wholesale gas and electricity prices, the energy industry has warned.
The trade body Energy UK has called on the government to intervene to help cut the cost of bills as soaring wholesale prices drive dozens of energy companies out of business.
“Domestic energy prices are going to go up 45% to 50% in the spring,” warned Emma Pinchbeck, the chief executive of Energy UK, speaking on BBC Radio 4’s Today programme on Thursday.
“It is looking pretty serious for the spring. This is a system-wide issue now. We are asking for the Treasury in the UK to intervene as others have [in Europe],” Pinchbeck said.
While wholesale prices continue to climb steeply, the UK’s price cap on energy bills stops companies from immediately passing those costs on to their customers. Since 1 October, the price cap, set by the industry regulator, Ofgem, has been set at a record £1,277. It is due to change on 1 April when Ofgem is set to raise the cap significantly, which will in turn result in consumers’ bills rising significantly.
“We have had record-breaking gas prices across Europe since September and over the last couple of weeks prices have spiked again and they are at levels we frankly have not really faced in the industry,” Pinchbeck said. “Particularly not in a winter period, with the UK in the middle of a pandemic, and other cost of living issues and inflation.”
Pinchbeck said that only about a fifth of a consumers’ energy bill in the UK is in the control of suppliers. The government sets other costs such as VAT and green energy levies, which could be reduced to help domestic customers.
“A significant proportion of the bill is policy costs,” she said. “Many other governments across Europe have reduced taxes or VAT on bills. In the UK that would save around £90 per customer. There are also policy costs on energy bills that government was consulting on removing, on electricity bills primarily, they could bring that forward. That saves about £190 per customer.”
Nigel Pocklington, the chief executive of London-listed Good Energy, described the situation as a “national crisis”.
“Wholesale gas and power prices have increased to unprecedented levels over the last three weeks, creating an extremely difficult operating environment for every business in the industry,” he told the Financial Times.
EDF, the UK’s fourth biggest energy supplier, said the situation was “critical” and the government must “act now to support energy customers”. Philippe Commaret, the managing director for customers at EDF Energy, said that by next October the UK’s energy price cap “could easily exceed £2,000”.