Cost of living crisis: Energy bosses warn of 'horrific' October price rises

Energy  File photo dated 03/02/22 of a homeowner turning down the temperature of a central heating thermostat. More action is needed to tackle fuel poverty as energy prices are likely to remain high for much of the year, a respected energy academic has said. Issue date: Thursday February 10, 2022.
Energy bosses are calling for overhaul of bills and aid to prevent 'horrific' winter ahead. Photo:PA

Energy firm bosses have warned of a “truly horrific” October for UK households as the price cap is likely to rise again and the weather turns colder.

Chief executives from four of the big six energy firms – Eon, EDF (EDF.PA), Scottish Power, and British Gas owner Centrica (CNA.L) – told MPs that customer debt will surge as families struggle to pay their energy bills.

Michael Lewis, chief executive of Eon, predicts that customer debt will surge by 50% by the end of the year, an £800m increase. That is up from £1.6bn now.

“We are expecting a severe impact on customers’ ability to pay, he said, adding that the number of families that risk fuel poverty will soar.

“We’re looking at up to 30% to 40% of people going into fuel poverty when the price goes up again in October. This is unprecedent so it requires unprecedented measures from government at this time,” Lewis said.

Read more: UK inflation hits 30-year high of 7% as cost of living crisis deepens

The cap rose by a record £693 per year on average in April – with pre-payment customers, who tend to be among the most vulnerable, facing an even larger increase.

Scottish Power boss Keith Anderson says he is worried for customers. “I am hugely concerned for people – massively concerned for people.

“There are so many who will struggle, really really struggle with this issue. We’re seeing the start of that,” he told the Business, Energy and Industrial Strategy (BEIS) Committee.

“Come October that’s going to get horrific, truly horrific.

“It has got to a stage now where the size and scale of it is beyond what I can deal with, beyond what I think this industry can deal with. I think it needs a massive shift, a significant shift in the government policy and approach towards this,” he added.

EDF has seen a 40% increase in calls from customers worried about their debt.

Simone Rossi, EDF chief executive, said: “We are concerned about what is in front of us. Unfortunately pre-payment customers are being hit first.

“We now see bills being higher for longer, so I would expect government to reassess in short order to see what is possible.”

Scottish Power has also been inundated with thousands of calls from worried customers.

"There is a huge amount of anxiety from people on the phones about what they face. A lot of people are facing this issue for the first time,” Anderson told MPs.

Chris O'Shea, the boss of British Gas-owner Centrica, said that the UK's largest supplier had seen a rise of 125,000 households in debt over the past 12 months.

It meant, he said, that 715,000 people owed money to British Gas already and warned the number would continue to climb.

Lewis called on the government to do more than the £150 council tax rebate, and £200 energy bill loan already announced, by removing VAT and green levies from energy bills in the short term.

“Those are tangible things that can be done before the increase again in October and that would help all customers,” he said.

Read more: How to save hundreds of pounds on your energy bill

Scottish Power’s boss proposed a deficit fund, which would allow people deemed struggling to be given 10 years to pay off £1,000 on their bills. The other three energy bosses present said they support some sort of social tariff to help the poorest households.

Energy bills in the UK surged after Ofgem, the country’s energy regulator, announced in February that it would increase its price cap by a record-breaking 54% from April 1.

Before April, the price cap meant the average household’s annual energy bill was between £1,277 and £1,370. Under the new price cap, millions of households could see their energy bills rise by around £700 a year to £1,971.

The Resolution Foundation said that as a result of higher prices coming into force on Friday, 2.5 million households in England would be plunged into “fuel stress.”

Watch: Why are gas prices rising