Energy companies suggest adopting a wholesale price mechanism to alleviate the pain caused by high prices

According to people familiar with the matter, energy companies have proposed a mechanism based on a government subsidy scheme that supports renewable energy generation as an option to protect British households and suppliers from high wholesale electricity and natural gas prices.

Talks between the energy supplier and the British Secretary of Commerce Kwasi Kwarteng will resume on Wednesday as the industry pushes for measures to help consumers as they face rising costs of living this year and prevent further large-scale collapse of the electricity and natural gas retail industry.

Energy industry executives said that as ministers continue to emphasize the importance of supporting the industry, they have made some suggestions to ministers. Since the beginning of August, under the weight of high wholesale prices, the industry has been hit by the closure of two dozen energy companies.

Analysts warned that energy costs could rise by more than 50% £2,000 per year In April, when the UK’s energy price cap is adjusted by the regulator Ofgem, it will serve millions of households in April.This may plummet Millions of people fall into fuel poverty And lead to a cost of living crisis.

The Resolution Foundation think tank warned last week that families are facing £1,200 per year Due to the sharp increase in energy bills and the increase in taxes, their income has decreased since April.

Two days after Christmas, the emergency virtual summit between Kwarteng and the energy CEO failed to reach a resolution.

Among the schemes proposed by energy companies, there is a mechanism similar to the “contract for difference” subsidy program that supports the development of renewable energy, and £20 billion fundAccording to people familiar with the matter. Both will allow suppliers to share the cost of soaring consumer energy wholesale prices in recent years, without jeopardizing their own balance sheets.

Under the differential contract mechanism, ministers must agree with the energy industry on the level of wholesale prices that they believe consumers can tolerate.

If the price is higher than this level, the supplier will receive payment from the government. Several people familiar with the matter said that when the wholesale price is lower than the agreed level, the supplier will return the money to the government, which means that the mechanism may be “self-funded.” However, this option is unlikely to be welcomed by members of Congress who oppose government intervention in the free market.

After the wholesale price of natural gas in the UK reached a new record of more than 450 pence per heat before Christmas, energy suppliers feared another wave of collapse.Price since then Greatly eased After experiencing a period of untimely warm weather in Europe, they are still about three times the level of trading a year ago.

Even well-managed suppliers have been struggling, and the cost of purchasing energy for their customers is sometimes £1,000 higher than the price they charge households through price caps. Based on average usage, the current annual limit per household is £1,277.

Energy executives emphasized that multiple interventions may be needed this year to prevent the wholesale price crisis from hitting households, including reducing VAT Energy bills and additional support for disadvantaged families.

The UK Department of Commerce stated that meetings between the government, industry and Ofgem will “continue in the coming days and weeks to ensure that British consumers are protected”.

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