UK fuel poor need deficit fund to survive next winter's bills: ScottishPower CEO

The UK government should take GBP1,000 ($1,300) off the energy bills of customers in fuel poverty and put the debt in a deficit fund, ScottishPower CEO Keith Anderson told the Business, Energy and Industrial Strategy Committee on April 19.

UK utility executives giving evidence to the parliamentary committee warned that the real impact to UK consumers would come in October, when the energy cap tariff is expected to rise again after a 54% hike from April 1 to GBP1,971/year on average.

"The size and scale of this is beyond what the industry can deal with. The government should introduce a deficit fund for anyone deemed to be in fuel poverty come October, with GBP1,000 taken off their bills and put into a fund," Anderson told MPs on the committee.

The sum could be repaid over a 10-year period, either spread across the consumer base or with the government partially funding the shortfall, he said.

"This could be stage one in moving to a social tariff when we have a little more stability," Anderson said.

This would see the current energy price cap, available to all consumers, converted to a discounted tariff exclusively for those that could not afford to pay.

Michael Lewis, CEO of E.ON, supported the idea of a social tariff but "in the short term the government needs to do more," he said.

The government has put forward GBP200 loans to consumers as well as measures on council tax and warm home discounts.

"Two hundred pounds is not nearly enough to mitigate the impact. If nothing is done further we expect to see outstanding debt increase by 50% [or GBP800 million] by the end of the year," Lewis said.

Moving environmental levies from bills to general taxation, removing VAT and increasing the warm homes discount would help.

S&P Global Commodity Insights assessed the price of month-ahead UK gas April 14 at 162.65 pence per therm, up 230% year on year.

Expensive failures

Commenting on the financial failure of around 30 energy suppliers since the start of 2021, Centrica CEO Chris O'Shea said he did not support the idea of transitional provisions to help struggling supplies stay afloat.

"This is a risky business, if you don't have enough capital you don't belong in this market," he said, noting supplier failures to date would cost every UK household GBP68.

"A third of that relates to misappropriation of customers' money. The insolvency services should pursue all of these companies, that would be a major deterrent [to misuse of funds]. I worry we'll see more failures this year that will dwarf those we saw last year," he said.

Hayden Wood, the CEO of collapsed retailer Bulb Energy, told the committee he was being paid GBP250,000/yr to help administrators find a buyer for the business and limit the cost of failure, put by one BEIS committee member at GBP3 billion.

"In November last year, when we had 1.5 million customers, the [regulated] price cap assumed a gas price of 70p/th versus an actual price of 400 p/th," he said.

Funding discussions fell through after Bulb found it could not access the long term hedging instruments it needed, Wood said.

"We had six months. We needed 12 months," he said.