Energy bosses call for price cap to be scrapped 

The calls came during a Business, Energy and Industrial Strategy (BEIS) Committee which saw the chief executives of E.ON, EDF, ScottishPower and Centrica give oral evidence on energy pricing and the future of the energy market. 

During the meeting, ScottishPower’s Keith Anderson called for the cap system to be scrapped and replaced by a social tariff, which would be designed to give those struggling a discounted price.

He highlighted the fact that currently customers on a prepayment meter - a service that has traditionally been used by those who have struggled to pay their energy bills - are at present being charged more. 

While the introduction of a social tariff would be a longer term goal, in the short-term Anderson has called for the introduction of £1,000 deficit fund for those in fuel poverty or who are vulnerable, ahead of the expected price cap increase in October. This would be a fund that can then be repaid over a 10-year period.

E.ON’s Michael Lewis, who said his company would support the introduction of a social tariff, suggested other short-term actions that the government could take, including removing environmental levies and putting into general taxation, as well as reducing VAT to zero and extending the warm home discount further. 

This, he said, could all be done before the energy price cap increase in October, which is likely to push 30% to 40% more people into fuel poverty. 

In April, the energy price cap increased to £1,971 for those on default tariffs - a rise of 54% - while those on prepayment plans saw an increase of £708 going up to £2,017. These record prices are expected to increase still further in October, with some market analysts predicting the cap could hit more than £2,900. 

Following the oral evidence given by these chief executives, the BEIS Committee heard from Hayden Wood - chief executive and co-founder of the UK’s seventh-largest energy provider Bulb Energy. 

In September last year, the firm became the first energy provider to enter special administration, which has seen the government fund the continued operation of the business. 

Speaking at the select committee hearing, Wood apologised for the “way things turned out with Bulb. He explained the company was started to “serve the customer”, and he was “very disappointed in the outcome”. 

He added: “Everything we’ve been doing ever since the company was founded, but especially over the last 18 months, has been to try and avoid special administration, minimise costs for consumers, and minimise costs taxpayers.” 

According to Wood, one the biggest challenges the firm faced when entering the market in 2015 was they didn’t have access to long-term hedging markets incumbents have access to. It had a hedging policy of procuring energy for its customers six months in advance. 

However the price cap methodology required businesses to hedge out for 12 to 14 months in order to determine the wholesale procurement with the price cap. He added: “But we just did not have access to those seven to 14-month markets through our trading counterparties. 

“In the beginning of 2021, we had begun fundraising conversations and tried to raise funding so that we could accumulate the collateral to get access to those markets, but we were unable to do that.”