UK energy bosses urged to help customers in 'national interest' as price cap set to rise

British Prime Minister Boris Johnson confirms government has asked electricity companies to help tackle rising prices

Ministers and energy bosses meet on Thursday. Photo: No 10 Downing Street

Energy companies have agreed to work with the UK government to help the people most in need, before a further surge in energy bills going into the winter, minsters said on Thursday, but no immediate assistance for hard-hit customers was forthcoming.

The UK’s departing Prime Minister Boris Johnson and Chancellor Nadhim Zahawi led emergency talks with energy companies to discuss how they plan to spend their bumper profits and explore ways to help customers struggling with the soaring cost of living.

The meeting failed to produce any immediate, concrete help for consumers.

Instead, ministers were reduced to pleading with companies to act “in the national interest” and help ease the pressure on vulnerable consumers in the face of soaring energy prices.

Officials said Mr Johnson made clear it was vital the Western world continues to stand by Ukraine, even as the war helps drive energy prices up to record levels.

“The government continues to evaluate the extraordinary profits seen in certain parts of the electricity generation sector and the appropriate and proportionate steps to take,” an official statement read.

Mr Johnson said: “We know that this will be a difficult winter for people across the UK, which is why we are doing everything we can to support them and must continue to do so.

“Following our meeting today, we will keep urging the electricity sector to continue working on ways we can ease the cost-of-living pressures and to invest further and faster in British energy security.”

Mr Zahawi and Business Secretary Kwasi Kwarteng pressed gas and electricity company executives for solutions to a predicted spike in bills this winter that will come on top of seemingly unending rises this year.

“In the spirit of national unity, they agreed to work with us to do more to help the people who most need it,” Mr Zahawi, who led the talks, said.

The price cap, which is reviewed every three months, was at £1,042 in January 2019. Getty

The conference with utilities bosses — including those from Centrica, Drax Group and RWE — came after market analysts at Cornwall Insight predicted bills were going to soar to about £3,582 ($4,380) in October, from £1,971 previously, before rising even further in the new year.

The price cap, which is reviewed every three months, was at £1,042 in January 2019 and is forecast to be higher than £5,000 in 2023.

Prices are rising on the back of wider, rampant inflation and energy concerns sparked by the war in Ukraine, with Russia being a key energy supplier for Europe.

Executives were asked to submit a breakdown of expected profits and payouts as well as investment plans for the next three years.

Former Labour prime minister and chancellor Gordon Brown suggested scrapping the price cap — a technique aimed at protecting customers from short-term price changes — and negotiating lower rates with energy bosses.

“Time and tide wait for no one. Neither do crises. They don't take holidays, and don't politely hang fire — certainly not to suit the convenience of a departing PM and the whims of two potential successors,” he said.

Mr Brown has also previously called for the Tory leadership contenders to set aside their differences and work on an emergency plan with Mr Johnson.

The crisis is becoming a dominant theme in the race to become leader of the UK Conservative party, and with it, prime minister.

Rishi Sunak and Liz Truss continue to face questions about what they will do to help struggling families.

Mr Sunak said it would be his “moral responsibility” to offer more help with bills, in particular to pensioners and those on benefits, if he were selected as prime minister.

Ms Truss appeared to back away from her previous position of providing no more “handouts”, when she said she would “do everything I can to support working families” if made prime minister, while emphasising her preference for tax cuts.

House of Commons Leader Mark Spencer acknowledged there are “huge challenges coming for people” on their energy bills during the autumn and winter.

“We need those energy companies working with us to try to solve some of those challenges, if at all possible,” he said

“They're making very huge margins at this moment in time and I think they ought to be able to assist people and try to suppress those bills as much as physically possible, but that's a conversation for them to have directly with the chancellor and business secretary.”

In Scotland, First Minister Nicola Sturgeon has called for a halt to energy price cap rises, and she accused the UK government of being “missing in action” on the issue.

She said many families face destitution in the coming months as a result of soaring bills.

Energy bills are set to cost more than two months of average take home pay next year unless the government intervenes, according to a report.

The TUC called on ministers to consult with trade union and business leaders to devise an urgent response to the crisis.

Average take-home pay after tax will be £2,054 a month in 2023, so two months’ worth will be less than the £4,200 predicted cost of energy bills for each household, said the TUC.

The union said the approach should be similar to that during the pandemic, when unions backed the furlough scheme.

The TUC called for measures including stopping the October energy price cap rise, bringing forward the annual increase in the national minimum wage from next April to October, and funding public-sector pay rises that keep up with inflation.

TUC general secretary Frances O’Grady said no one should struggle to get by in one of the richest countries in the world.

“Up and down the country, millions of families are being pushed to the brink by eyewatering energy bills," Ms O'Grady said.

"With prices set to skyrocket even further, it’s time to say enough is enough.

“Boris Johnson, Liz Truss and Rishi Sunak need to wake up to the size of this crisis. This requires a pandemic-scale intervention.

“Ministers must cancel the catastrophic rise to energy bills this autumn, and to make sure energy remains affordable to everyone, they should bring the energy retail companies into public ownership.

“Ministers should also act to boost pay – as well as Universal Credit, pensions and the minimum wage by bringing forward planned increases to October, and they should fund it through a bigger windfall tax on the obscene profits of energy giants."

Ms O’Grady said that without a long-term plan to prevent a similar living standards emergency, the country will keep “lurching from crisis to crisis”.

Meanwhile, a UK oil and gas body has urged the candidates in the running to become prime minister to scrap the windfall tax on profits as soon as possible.

In open letters to both candidates, Offshore Energies UK claimed the sector would pay about £13.8 billion into the Treasury next year as a result of the windfall tax and corporation taxes.

But the body raised concerns about the potential impact the law could have on investor confidence in the industry, urging Ms Truss and Mr Sunak to scrap it “when possible” and not extend it beyond the 2025 sunset clause.

“While the Energy Profits Levy Act means the sector is now providing the UK government with (about) £13.8 billion of the overall £15bn package of support for consumers, we remain concerned at the negative impact on investor confidence and want to work with the new cabinet to ensure that this is mitigated where possible,” wrote the company's chief executive, Deirdre Michie.

Ms Michie made six other requests for whoever wins the contest, including recommitting to the North Sea Transition Deal, ensuring regular “fiscal forums” are held in Aberdeen between the sector and the new prime minister and chancellor.

“In the coming weeks, we will be engaging with both candidates and your respective campaign teams to ensure the sector’s voice is heard at this pivotal time for energy security, and delivering on the UK’s net-zero commitments by 2050,” the letters said.