The cost to energy businesses will be gradually repaid by taxpayers either through government borrowing and higher taxes, or through energy bills over 10-15 years – or a combination of the two.
London, Thanasis Gavos
A plan to protect the British households from the ever-increasing energy prices, which will cost at least 100 billion pounds for the next two years, the head of one of the major energy supply companies has submitted to the government for consideration.
As they reveal Financial TimesThe Scottish Power chief executive Keith Anderson proposed to Business Minister Kwasi Kwarteng to freeze the average household’s energy charge cap at around £2,000 a year for two years.
At the moment the per kilowatt hour charge cap sets the average annual charge for a typical household’s energy consumption at £1,971 a year. That’s almost double the amount of a typical annual fee just 18 months ago.
It will be announced on Friday new ceiling increase, with effect from October, to over 3,000 a year. Forecasts call for further increases in early 2023, possibly to more than £6,500 a year from April.
Under the proposal by Scottish Power, one of the UK’s six largest energy companies, energy providers would cover the gap between frozen bills to their customers and increased wholesale gas prices by borrowing from a “deficit fund”, which the government will set up through commercial banks.
The cost to energy companies will be gradually repaid by taxpayers either through government borrowing and higher taxes, or through energy bills over 10-15 years – or a combination of the two.
Mr Anderson’s direct discussion with the Business Secretary takes on added weight as Mr Kwarteng is seen as the front-runner for Finance Minister in a Liz Truss government ahead of the race to succeed Boris Johnson as UK Prime Minister.
Her opponent Rishi Sunak appeared wary of the plan, telling the BBC it might increase inflationary pressures.
Instead, according to the FT’s sources, Mr Kwarteng was receptive, although he made it clear to Mr Anderson that no decision would be made until the new Prime Minister was named on September 5.
The British economic newspaper points out that Scottish Power’s proposal indicates that the energy industry in Britain believes that the energy crisis will continue for another two years.
He also notes that the cost of the proposed energy precision package is higher than the government’s plan to cover private sector wages under the work suspension program during pandemic lockdowns. This program, which had been implemented as Minister of Finance by Mr. Sunak, had cost a total of 69 billion pounds (from March ’20 to October ’21).
The outgoing Johnson government’s anti-energy austerity measures announced by Mr Sunack so far include £15bn of emergency aid to households.
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