Suppliers are urging the government to take immediate action to help households struggling with energy bills this winter.
Energy UK, the suppliers' trade body, stated that domestic gas prices, which rose on Thursday, coupled with forecasts of steep increases in January, mean that inaction would lead to a longer-term, more costly, and deeper crisis.
Figures revealed by the BBC earlier this week indicated that forecasters were predicting a 16% rise in domestic energy prices in the new year for 20 million households on variable tariffs affected by regulator Ofgem's price cap.
Prime Minister Andy Burnham said the government was considering any measure that would alleviate pressure.
Households in England, Scotland, and Wales on variable energy tariffs set by Ofgem's price cap, which limits the price per unit of gas and electricity, experienced a 4% price increase at the start of October. This amounts to approximately £60 per year, or £5 per month, bringing the typical household's annual bill to £1,723 for those using both electricity and gas and paying by direct debit, if this level were sustained for a year.
However, forecasts suggest a much larger increase is possible for bills in January. Consultancy Cornwall Insight predicts that the same typical annual bill could rise to £1,999.
Energy UK acknowledged the government's existing support measures, such as the reduction in VAT on electricity bills on Thursday and the cancellation or shifting of some levies into taxation earlier this year. However, the trade body argued that these savings have been nullified by high wholesale prices paid by suppliers, which are partly attributed to international events, including conflict in the Middle East and disruptions to shipping through the Strait of Hormuz. They noted that bills are soaring, similar to the situation in 2022, which was driven by the impact of Russia's invasion of Ukraine.
"We cannot afford to wait for the same scale of crisis before acting again. We must heed the lessons from that time," said Dhara Vyas, chief executive of Energy UK. She highlighted that the urgent intervention needed is underscored by growing levels of customer debt, which now adds an average of £67 per year to everyone's bills.
On Thursday, Simone Rossi, the boss of supplier EDF Energy, warned that the UK was "walking into a second energy crisis," and Vyas echoed the call for action before bills increase further.
"Last-minute emergency interventions run the risk of being badly targeted and costing us all more," she stated.
Energy UK is proposing government measures including:
- Targeted support beyond the £150 Warm Home Discount, which is provided to individuals on benefits, potentially leading to the introduction of a discounted social tariff.
- A debt relief scheme for the most severely affected households, as part of a strategy to also prevent debt accumulation among new tenants and homeowners.
- The removal of additional levies from electricity bills and their transfer to taxation, as part of a broader move towards electrification.
Adam Scorer, chief executive of the charity National Energy, which campaigns against fuel poverty, agreed with Energy UK's analysis, telling BBC Breakfast that the increase in debt signifies "not more people getting into debt, that's more poor people getting into more serious levels of debt."
He added, "Until you do something about that, there's no way forward, there's no breathing space, there's no future for households who can't see their way beyond debt."
At the Labour Party conference last week, Prime Minister Andy Burnham told the BBC that he did not consider Rossi's crisis warning an overstatement, noting that the cost of home energy, as well as petrol and diesel, was "very difficult indeed."
"We're looking at any measure that can give people breathing space, that can take the pressure off," he said.
