UK households will get a £200 rebate on energy bills under Treasury plans
UK households will be offered rebates of around £200 to help them cope with soaring energy bills, but suppliers have said the scheme will only cover around a third of the expected rise in fuel costs. gas and electricity this year.
Bills are expected to soar from £1,277 to around £2,000 for an average home to reflect a huge rise in wholesale gas prices and the cost of dozens of suppliers who have gone bankrupt in recent months.
Regulator Ofgem will unveil its new energy price cap at 11am on Thursday after bringing forward the announcement. The new cap will come into effect on April 1.
To help struggling families cope with the blow, a government-backed loan scheme of £5-6billion is to be launched, allowing suppliers to borrow money to cover upfront energy costs.
The plan will allow providers to recoup money over several years rather than hitting bill payers with the entire increase at once.
A senior industry source said The Independent that negotiations were underway with a major high street lender to cover additional costs related to supplier defaults.
The talks broke down because the bank involved wanted an interest rate that the government and suppliers considered excessive.
Other industry sources said suppliers believed they had not been properly briefed on the government’s plans, felt left out of recent Treasury consultations and were surprised to read news articles on Wednesday about the loan program.
The measures, which are believed to have been approved by ministers, fall well short of the £20billion in loans the industry had requested and will only cover around a third of the bill increases customers are facing.
According to the plans, first reported in theTime, suppliers will give households a rebate equivalent to £200 each. It is not known how this money will be distributed among the different households.
Ministers are also expected to announce additional help for those who need it most, including an extension of the warm homes discount which offers £140 a year off bills for people on low incomes.
The Treasury dismissed the reports as “speculation” and declined to comment further.
Energy suppliers welcomed the news but stressed that the level of financial support was lower than had been hoped.
A spokesman for Octopus Energy said spreading the cost increase over several years and supporting every household would be a “big move”.
“We had hoped that more money would be taken from bills, but we have not yet received details on how this will be implemented. It all depends on the implementation.
Suppliers will expect to eventually recoup the money they borrow from their customers, and bills will have to rise further if wholesale prices don’t start falling.
Analysts expect high energy prices to last at least two years.
If prices fall, the program would likely mean that those wholesale cost reductions will not be passed on to customers until government-backed loans are repaid.
Rising energy prices are expected to be accompanied by an overall spike in the cost of living in the UK, with inflation expected to rise from its current level of 5.4% to over 6%.