The UK government should go on “war basis” to tackle the energy crisis as regulator Ofgem prepares to announce a sharp rise in energy bills from October, a former senior adviser said.
The cap on typical household energy bills is expected to roughly triple from a year ago to £3,600, according to industry and government estimates – with further increases of more than £5,000 possible early next year.
Adam Bell, the former head of energy strategy in the business division, said the new Prime Minister, who will take over on September 5, must act quickly to replace gas in the energy mix of the UK economy as concerns about the impact mount. . of rising prices for households and businesses this winter.
“War base is the necessary response to this situation — this is like the oil crises of the 1970s, but the difference is that we now know how to get out of this,” Bell said. “The question is whether the government is willing to continue with the rapid degassing of the economy that is clearly needed.”
Bell’s comments were echoed by Lord David Howell, energy minister under Margaret Thatcher in the 1980s, who told the BBC that the government should be “very concerned” and go through the winter with something “similar to a war base”.
The government is investigating a possible household bailout proposed by Scottish Power that would limit bills to around the current level of £2,000. That level of intervention would cost about £100 billion over the next two years, exceeding the size of the coronavirus leave scheme that protected millions of jobs during the pandemic.
James Cooper of consultant Baringa warned that without government support, rising energy costs would have a greater effect on the average household than the 2008 financial crisis. “We are now moving into an area where a majority of households are in debt or in a very vulnerable position. financial position,” he said.
The sharp rise in energy bills is driven by the rising international price of wholesale gas, largely due to Russia’s decision to cut supplies to Western Europe in response to sanctions imposed after the invasion of Ukraine.
UK gas prices have nearly quadrupled since mid-June and are now trading at about ten times the average level of the past decade.
Dale Vince of Ecotricity, a renewable energy producer and energy retailer, said the government needed to step in to protect both the public and small businesses, which are not covered by the price cap. Many companies will have to deal with at least a quadrupling of energy bills from October.
He called on ministers to consider a proposal to impose a price cap on gas producers in the British part of the North Sea, similar to restrictions on energy retailers that limit their profit margins to around 2 percent.
“This is as exceptional as the pandemic and needs a similar response,” Vince said. “Almost 50 percent of British gas comes from the North Sea, so we can solve half of the crisis in one fell swoop.”
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Sir Keir Starmer, leader of the opposition Labor party, said ahead of Ofgem’s announcement that the government was “absent at this time of national crisis”.