Chris O’Shea told a House of Lords select committee yesterday that every household will have to pay at least £100 to cover the shortfall created by the price cap on tariffs
Energy bills could shoot up by as much as £200 because of the failure of suppliers, the boss of British Gas owner Centrica yesterday warned.
Chris O’Shea told a House of Lords select committee yesterday that every household will have to pay at least £100 to cover the shortfall created by the price cap on tariffs.
A total of 16 energy suppliers, which supplied 2.5 million households, have gone bust so far this year because of soaring wholesale gas prices.
Experts have predicted that as many as 20 more could fall in the next few weeks in the face of soaring wholesale gas prices.
The price cap on tariffs means that energy companies are paying more for gas and electricity than what they are allowed to charge customers.
Energy suppliers taking on new customers when their existing providers collapse are buying gas at market prices far higher than what they are allowed to charge.
Millions of customers have had to be switched to new suppliers and Centrica chief executive Chris O’Shea said the shortfall is between £700 and £1,000 for each customer being taken on.
He said it has created a hole worth about £2.5bn in total which will have to be paid by customers through 2022 and 2023.
The price of natural gas on the UK market has rocketed in recent weeks and remains high
Mr O’Shea told the House of Lords yesterday it would cost ‘every single home in the UK’ £100.
He said: ‘The current retail market failures will put £100 on the bill of every single home in the UK, whether it’s a house in Belgravia or a studio flat in a deprived area of Glasgow.
‘It’s not unreasonable to expect that to double in the next few weeks; Ofgem have been quite clear that they expect many more suppliers to go out of business.’
He added that the ‘highly regressive’ system used to recoup costs through energy bills was the same system used to fund policies to drive the shift to net-zero carbon emissions, and called for this to be reformed.
He said: ‘We believe that these costs should be met from general taxation, that it should be progressive.’
The rise will come on top of the huge cost increases households have already seen because of the energy price cap rising this month.
Scottish Power’s Keith Anderson warned as many as 20 energy suppliers are likely to go bust
Families on a standard tariff with typical energy usage have seen their bill rise by £139 to £1,277 a year.
The cap, set by energy market regulator Ofgem, is set to be ‘adjusted’ again in April, Ofgem’s boss has warned.
Analysts suggested the hike could be as much as £800, leaving households paying more than £2,000 a year for energy.
Scottish Power boss Keith Anderson said last week as many as 20 energy suppliers are likely to go bust in the next few weeks.
He called for the price cap to be abolished and replaced with a system where poorer households’ bills are capped but others pay the market rate their suppliers are charged.
Wholesale gas prices have soared in recent months as economies reopen from COVID-19 lockdowns and high demand for liquefied natural gas in Asia pushed down supplies to Europe.
Some 16 British energy suppliers have already collapsed this year, affecting more than 2.5 million customers.
Struggling to cope with record gas prices, nine folded in September, including Enstroga, Igloo Energy and Symbio Energy.
Households attached to collapsed companies will be placed into a rescue regime which will involve Ofgem searching for a new supplier to take them on.
While there is no risk that their gas or electricity supplies will be cut off, they will be switched to tariffs which are likely to be around £400 a year higher.
Under the ‘supplier of last resort’ system, outstanding credit balances owed to existing and former customers will be paid and householders transferred will be protected by the energy price cap.
But customers who were on cheaper fixed price deals, signed before the gas price rise, were warned that bills could jump by hundreds of pounds.
And now, with the annual price cap set to rise to £1,277 from October for a typical household, British Gas and EDF Energy are among the suppliers set to charge customers the top rate.