Energy industry calls for state-backed crisis fund to avert huge rises in household bills

·2-min read

The energy industry has piled pressure on the government to end its silence on rocketing bills, calling for a crisis fund to block the looming huge increases.

The chancellor, Nadhim Zahawi, is urged to embrace the idea of a “deficit tariff scheme”, to allow the pain to be spread over 10 to 15 years, in a letter from the Energy UK group.

It argues the state-backed fund would allow customers to pay back the cost through a surcharge on bills or through tax – potentially freezing the price cap for two years.

Labour, which has called for such a freeze, pointed to the letter as proof of “a consensus across the country, including in the energy industry, that urgent action is needed”.

However, the plan, first floated earlier this year, is likely to run into the same objection senior Tories have raised against Labour’s proposal – that it would create a debt mountain of up to £50bn.

Boris Johnson has declined to get involved in what Labour calls the “national emergency” of soaring energy bills, insisting it is a matter for his successor next month.

Both Liz Truss and Rishi Sunak have been criticised for failing to set out plans for curbing the rises, the former – the favourite to reach No 10 – backing poorly-targeted tax cuts against what she calls “handouts”.

The Treasury is drawing up options to help households which will be presented to the incoming prime minister once Mr Johnson leaves Downing Street on 5 September.

The new price cap – to be announced on Friday next week – is expected to hit £3,582 from the start of October and then reach as high as £4,200 from January.

However, Energy UK, whose members include EDF Energy, Ovo and National Grid, acknowledges it would take until at least early next year to set up the crisis fund.

Therefore, it wants ministers to provide the “urgent” support needed this winter by extending the existing support scheme announced by then-chancellor Mr Sunak in May.

Those payments will cut £400 from bills for all households for a six month period from October, a sum that should be increased, the organisation argues.

Then, it stated: “Government-backed loans could be used to keep bills down throughout 2023 by covering the increased cost of wholesale energy for suppliers and allowing these to be spread over a much longer period of 10-15 years instead.”

Energy UK, also wants an expert energy panel to draw up ways to keep bills down and for the government to consider a dedicated department of energy.

Ed Miliband, Labour’s shadow secretary for climate change, said: “The energy bills crisis is national emergency, but the Conservative government is asleep at the wheel, refusing to freeze energy bills.

“There is a consensus across the country, including in the energy industry, that urgent action is needed. It is intolerable that the Conservatives continue to offer no solutions to this crisis.”