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Energy bosses will hold emergency talks with the government on Monday after record high gas prices last week refuelled calls for an urgent intervention to avert “an enormous crisis” in the year ahead.
The business secretary, Kwasi Kwarteng, is expected to lead a virtual meeting of energy company chief executives to address fears that the ongoing winter energy crisis may escalate following new price highs across Europe last week.
Stephen Fitzpatrick, chief executive of energy supplier Ovo, told the BBC there had been “nowhere near enough urgency” from the government, even as soaring wholesale costs threatened “an enormous crisis for 2022”.
Gas prices surged last week to 450p a therm, around nine times higher than a year ago, surpassing the record high set in October this year as supplies from Russia slowed despite rising demand to beat the winter cold.
“We’ve seen this energy crisis unfold now for the last three months and we’ve watched as energy prices have spiked, fallen back, and spiked again,” Fitzpatrick said.
“We’ve had more than 30 bankruptcies in the sector, we’ve had millions of customers forced to change supplier. The cost to the consumer has already been more than £4bn.”
He added: “We haven’t seen any action from the government or from the regulator. There’s an acceptance that there’s a problem, but nowhere near enough urgency to find a solution.”
Nigel Pocklington, the chief executive of supplier Good Energy, told investors last week that “no one in the industry is immune” to the surge in market prices, and called on the government to “support the industry at large in navigating these short-term challenges to protect bill-payers and those that serve them”.
“This is a national crisis,” Pocklington said. “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.”
Energy bosses are expected to call for the government to offer help to hard-hit households by cutting VAT from bills, and moving green support levies into general taxation. They are also expected to discuss new ways to manage the cost of energy company failures, which has affected millions of households since September.
The government also faces growing calls from opposition parties to take action against the energy crisis, which has caused the steepest ever winter bill hike in October and is likely to lead to even larger increases in April when the regulator is due to reset its energy price cap.
The Liberal-Democrats have calculated that households are likely to pay a total of £100m more for their gas and electricity between Christmas and New Year compared to last year. Ed Davey, the party’s leader, said the government had “totally failed to tackle the problem” and called on ministers to double the financial help offered through the warm home discount scheme.
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Ed Miliband, Labour’s shadow energy minister, called on the government to stop families being “clobbered” with the increased cost of heating and powering their homes, by removing VAT on bills for six months. A similar plan is in place in Spain which has cut energy taxes, and in Germany which has slashed green levies on household bills.
The Labour party has calculated that the surge in home energy bills is likely to have handed the Treasury a “windfall” of £3.1bn since October’s budget, which would more than offset the £2.4bn impact of removing VAT from heating bills over the winter period to help hard-pressed families.
However, the Treasury said higher energy bills could mean that households reduce their spending on products and services which face a higher rate of VAT meaning an overall reduction in revenues.
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