Energy bills could skyrocket more than 50% to £2,000 a year in the New Year as ‘stratospheric’ wholesale gas prices threaten a ‘national crisis’, providers warned today – as former Tory leader Iain Duncan Smith accused Putin of holding Europe to ransom.
Good Energy, EDF and trade body Energy UK are calling on the Government to urgently intervene after the cost of gas in wholesale markets rose by more than 500 per cent in less than a year. It is currently at £4.50 a therm.
Emma Pinchbeck, chief executive of Energy UK, described the situation as a ‘nationwide crisis’, telling BBC Radio 4’s Today programme: ‘Domestic energy prices are going to go up 45% to 50% in the spring.
‘It is looking pretty serious for the spring. This is a system-wide issue now. We are asking for the Treasury in the UK to intervene as others have [in Europe].’
Investment bank Investec predicted customers could face a 56% rise in their energy bills from April, pushing them towards the £2,000-a-year mark, the FT reported.
Gas prices have surged over recent months. This graph shows wholesale prices up to November 30
Twenty-five providers have collapsed since the end of the summer, affecting more than four million households
Iain Duncan Smith blamed Russian president Vladimir Putin for ‘driving up prices’ by restricting supply and said Europe was ‘in his hands’. He insisted Boris Johnson should be telling ‘crusties’ objecting to exploiting the UK’s resources to ‘get lost’.
‘The answer is very simple. We should be getting our own gas,’ he told MailOnline.
‘We are sitting on an island on top of gas and oil. We used to be net exporters, we are now net importers and it’s not because we’ve run out – it’s because successive governments stopped exploration and stopped development.
‘So the result is now that we are reliant on dodgy regimes like Putin and others for our gas, and that may salve the conscience of a few fanatical environmentalists, who don’t want the UK to get gas.
‘But we still require gas, otherwise we shut down. And that means we’ve made ourselves reliant on these dodgy regimes.’
Sir Iain pointed to supplies in the North Sea as well as untapped shale gas on land.
‘Why would we allow Putin and these other dangerous leaders to hold us to ransom when we have our own oil and gas?’ he said. ‘These guys will drive up the price by cutting supply.
Former Tory leader Iain Duncan Smith blamed Russia for driving up gas prices
‘Who the hell wants to be in the hands of that despotic man Putin or in the hands of the Chinese or in the hands of the Belarusians, or in some of the dodgy regimes that exist in other parts of the world where we’re having to try and beg borrow or steal gas?’
‘Just tell these crusties that spend their time protesting they still live off gas, even if they don’t like it,’ he added.
Today, Mr Putin told a press conference it would be unfair to blame Russia for the increases.
Energy companies are prevented from immediately passing on rising gas prices to consumers due to the UK’s price cap on energy bills – currently set at £1,277.
More than two dozen energy suppliers have gone bust since the start of September, putting thousands of people out of work and leaving millions of homes in limbo as they wait for a new supplier.
Industry regulator Ofgem is set to rise the cap significantly from April 1, which will in turn lead to higher prices for consumers.
‘We have had record-breaking gas prices across Europe since September and over the last couple of weeks prices have spiked again and they are at levels we frankly have not really faced in the industry,’ Ms Pinchbeck said.
‘Particularly not in a winter period, with the UK in the middle of a pandemic, and other cost of living issues and inflation.’
Energy providers have forecast that bills for consumers could rise by up to 50% in the spring
The Energy UK boss said only about a fifth of customers’ energy bills was in control of suppliers, with the rest made up of additional costs including VAT and green levies.
‘A significant proportion of the bill is policy costs,’ she said. ‘Many other governments across Europe have reduced taxes or VAT on bills. In the UK that would save around £90 per customer.
‘There are also policy costs on energy bills that the government was consulting on removing, on electricity bills primarily, they could bring that forward. That saves about £190 per customer.’
The 25 UK energy firms which have gone bust so far
- Neon Energy Limited
- Social Energy Supply Ltd
- CNG Energy
- Omni Energy Limited
- MA Energy Limited
- Zebra Power Limited
- Ampoweruk Ltd
- Bluegreen Energy Services Limited
- GOTO Energy Limited
- Daligas Limited
- Pure Planet
- Colorado Energy
- Igloo Energy
- Symbio Energy
- Avro Energy
- Green Supplier Limited
- Utility Point
- People’s Energy
- PFP Energy
- MoneyPlus Energy
- HUB Energy
- Entice Energy
- Orb Energy
- Zog Energy
Nigel Pocklington, chief executive of Good Energy – a small renewable energy firm, has said the UK is facing a ‘national crisis’ after recent rising prices created ‘an extremely difficult operating environment for every business in the industry’.
EDF Energy warned the Government the situation was ‘critical’ and it must act immediately to support customers.
Suppliers said the cost will be passed on to households up and down the country, putting further pressure on already rising bills.
Many in the energy industry blame part of the problems on the energy price cap. The cap is currently set every six months, and as gas prices have soared in recent months it has forced suppliers to provide energy to households at eye-watering losses.
The industry regulator, Ofgem, has proposed a series of short and long-term solutions to the issues the price cap causes in extreme circumstances.
These include reviewing the price cap every three months, or overhauling it in favour of a six-month fixed tariff.
Jane Foley, senior currency specialist at Rabobank, said energy companies who had picked up customers from collapsed rivals had already spent about £1.8billion on buying energy from them in the wholesale markets.
‘That £1.8bn won’t be the end of the story,’ she told BBC Radio 4’s Today programme.
‘It’s likely to go up to about £2.5bn, because the £1.8bn is solely the cost of the extra energy they’ve had to go and buy on the wholesale markets for these new customers.
‘When you take into consideration the extra staff and IT costs the final bill is going to be a lot more. And when it’s passed onto consumers it could be a lot more than £100.’
Asked if she had any concerns about the security of UK energy supplies, she said: ‘Well, I think the answer is yes. Officially every time this topic is raised, the government bats it away and says there’s no issue.
‘But experts have said the government has an urgent need to review their security policy, which was last updated in 2017, before Brexit.
‘We’ve got a lot of liquid natural gas heading towards Europe, but Brexit perhaps changes the equation about how secure we can be as an independent country.’