An energy boss unveiled a plan to subsidise energy bills on Thursday, after weeks of inaction from the government.
Stephen Fitzpatrick – who leads the UK’s third largest energy company, Ovo – has suggested energy firms could borrow from a government-supported fund and then subsidise skyrocketing prices for households across the country.
This would also allow the poorest homes to get the most support.
It comes as the UK is just weeks away from yet another hike in the energy price cap. For the average household, annual energy costs are about to soar to £3,549 come October 1 – an increase of around 80%.
These prices have contributed to inflation, which is now at 10.1% and could be set to climb to 18.3% come January, according to Citi investment bank.
Here’s what you need to know.
What’s the plan?
Ovo Energy (which has 4.5 million customers) has revealed a 10-point plan would mean every UK household would receive some financial aid – but the amount wealthier homes get would decrease as they used more energy.
Fitzpatrick also wants the government’s cost of living payments (first announced in May) to be brought forward. This means people would receive the £400 discount from their bills this side of Christmas, instead of over a six-month period, while lower-income homes would get around £650 extra in benefits.
He dubbed the higher charges which pre-payment customers face a poverty penalty and called for them to be abolished. Fitzpatrick also called for the standing charge to wiped out, which is a fee customers have to pay regardless of how much energy they use.
The energy boss said: “If we don’t use every available moment over the next 12 weeks to solve this, we are going to see a winter like never before with people going hungry and going cold and the NHS being overwhelmed by the health impacts of the energy crisis.”
But, he warned: ”[There’s] almost nothing that we can do right now that’s going to be in time for October 1 when prices go up.”
Instead, he wants plans to be put in place right now, so that they will have an impact when prices get even higher in the winter.
Ovo is not the first company to suggest a solution.
Scottish Power suggested freezing energy bills at their current energy price cap, but the Treasury said that was giving the same relief to rich and poor households.
Last month, one energy boss offered a handy analogy to understand the enormous change in energy rate by illustrating what would happen to the price of a pint of beer if it increased at the same rate as energy.
Jonathan Brearley, the CEO of Ofgem, the body that decides the energy price cap also released a statement explaining the rise in prices and said Ofgem is working with ministers to come up with options “for the incoming Prime Minister that will require urgent action.”
How urgent is this situation?
Experts both in and out of the energy industry have issued intense warnings about what might happen this winter unless households receive some financial help with these bills.
In August, Octopus Energy chief executive Greg Jackson warned that if gas prices had risen at the same price as beer, it would cost £25 per pint right now.
Other analysts claimed that, if all prices rise with the energy price cap in October, it would cost £28 per coffee.
Then there are worries about blackouts, after Bloomberg revealed that the government’s emergency winter contingency plan included four potential days of intentional power cuts.
Meanwhile think tank Resolution Foundation has predicted that real incomes are going to fall by £3,000 over the next two years, with absolute poverty rising by three million.
Lalitha Try from Resolution Foundation told the BBC: “No responsible government could accept such an outlook, so radical policy action is required to address it.”
“As the public would rightly expect, we are working closely with the NHS to ensure we are ready for extra pressures this winter, including providing an extra £79 million last year to significantly expand our mental health services, enabling more children and young people to get help.”
A review by the UCL Institute of Health Equity suggested thousands of extra deaths might be ahead as families struggle to heat their homes.
What’s the government been doing?
Chancellor Nadhim Zahawi said on Thursday that he was “deeply concerned” people could freeze this winter, adding: “No one should be cut off because they can’t afford their bills.”
He said “nothing is off the table” and that he was looking at “all the options” to fix the scenario.
Downing Street has repeatedly said it is preparing to deliver an extra package, but only when the new prime minister comes into office.
There is already a package of support set to kick in this winter, introduced by Rishi Sunak back in May when he was chancellor, but the current crisis has outstripped the help announced at the time.
Now one of the two remaining contenders to replace Boris Johnson, Sunak has not ruled out energy rationing to ease living standards.
His opponent, and the frontrunner in the race, Liz Truss has said she would consider providing further support to households and businesses (which do not have an energy price cap). Her priority seems to be cutting taxes.