Energy UK has urged the government to take further actions to reduce household energy bills after Cornwall Insight forecast the price cap to rise to nearly £3,400 over the winter.
The energy industry trade body said this could include removing VAT from energy bills, moving policy levies onto general taxation and seeing whether other costs could be spread out over a longer period of time.
In its most recent forecast, Cornwall Insight predicted the price cap on default tariffs to balloon from its current level of £1,971 per year for a typical direct debut customer to £3,244 in October and £3,363 in January next year.
Giving evidence to the House of Commons Public Accounts Committee on Monday (11 July), Ofgem chief executive Jonathan Brearley admitted that the next price cap revision would be higher than the £2,800 level he had previously predicted in May.
Energy UK also noted a recent report from Citizens Advice, which estimated the total costs of the nearly 30 supplier failures since August 2021 at £4.6 billion – equating to £164 per household. The trade association said deferring these costs could provide some relief to customers.
“It’s extremely worrying news for customers that energy bills could be even higher than originally predicted this winter,” said Energy UK director of advocacy Dhara Vyas.
“The number of people contacting their energy company is higher than ever and suppliers know that many of their customers are already struggling with paying household bills and managing their finances during this cost-of-living crisis.
“Suppliers are continuing to do all they can to support customers, investing hundreds of millions of pounds in additional funds and providing financial relief to those that need it most. But the scale of the help needed is too big for any industry to meet.”
In May, the chancellor at the time, Rishi Sunak, revealed a £15 billion support package for billpayers, including a £400 discount on energy bills in October and a one-off payment of £650 to more than 8 million low-income households on benefits.
“While the current support package is very welcome,” said Vyas, “if bills are going to be even worse than had been predicted, further government intervention will be necessary.”
“This could include looking at what else can be taken off energy bills, even on a temporary basis, to provide further and much-needed relief for customers. It’s essential that the next prime minster urgently implements long-term plans to improve energy efficiency in homes and increase sources of clean domestic energy to bring down bills permanently.”
Energy UK said it is working with its members, Ofgem and consumer groups to ensure their messages are consistent and that organisations involved in support customers have all the necessary information to enable people to access the support they are eligible to. It said suppliers are also preparing for a further increase in contacts from customers by training up hundreds of new customer service specialist and opening more communication channels.
Last week a number of energy suppliers – including Centrica, Octopus, Eon, EDF, Ovo and Shell – agreed to work together to develop a universal signposting tool to help billpayers understand the available support and where to access it following meeting between themselves, charities and Money Savings Expert founder Martin Lewis.