Up to four in ten people in Britain could fall into energy poverty when the price cap rises again this autumn, energy bosses have told MPs as they call for increased government support for vulnerable households facing a “really horrible” winter.
Michael Lewis, chief executive of E.ON UK, said between 30% and 40% of Britons could fall into energy poverty from October, when sector regulator Ofgem is expected to impose the limit again annual rates.
“We expect a serious impact on customers’ ability to pay,” he told MPs on Parliament’s trade, energy and industrial strategy select committee, adding that he expected customer debts increase by 50% or £800 million.
He said that with more people falling into energy poverty, this would lead to a significant increase in bad debts.
Customers have called energy suppliers to express their concern about the dramatic increase in their bills.
ScottishPower alone has received 8,000 calls from customers concerned about their ability to pay, its chief executive, Keith Anderson, told MPs.
He said he was ‘massively concerned’ about people facing rising bills who ‘will be really, really struggling’ and called for the introduction of a £1,000 deficit fund or tariff social for vulnerable clients.
The fund would take £1,000 from the bills of the country’s poorest people in October and the government or consumers would then pay this back over 10 years, he suggested.
The energy regulator lifted the price cap on bills earlier this month, taking the average household dual-fuel tariff from £1,278 to £1,971. This is set to rise again in October, with some experts expecting the price cap to hit £2,600.
“In October it’s going to get awful, really awful,” Anderson said. “It’s now reached a stage where its size and scale is beyond what I can handle, beyond what I think this industry can handle. I think there needs to be a massive change, a significant change in the policy and the government’s approach to it.
The EDFManaging director Simone Rossi said he had seen a 40% increase in calls from customers worried about their debt.
“We are concerned about what is ahead of us,” he said. “Unfortunately, prepaid customers are the first to be affected. We are now seeing bills being higher for longer, so I would expect the government to quickly reassess to see what is possible.
Earlier, Ofgem chief executive Jonathan Brearley said increases in fuel bills would be investigated over concerns suppliers were unfairly charging households.
Gas prices, in particular, have surged in recent months, prompting almost all household energy suppliers to raise their prices to the maximum allowed. However, some consumer groups have argued that energy companies have raised prices more than necessary to strengthen their own balance sheets at the expense of customers.
Brearley told BBC Radio 4: “We will be looking closely at these direct debits. We’re going to make sure they’re raised fairly – clearly prices have gone up – and if they haven’t been, we’ll take action and make sure the companies put things right.
“You shouldn’t take more than you need. You should not build up a credit balance.
He insisted that price increases must be introduced “in a reasonable and fair manner” and not for “other reasons outside the interest of the customer”.
Energy companies should set aside customers’ money so that it is only used to pay for their gas and electricity, he said.