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.
Due to soaring wholesale gas prices, 16 energy suppliers that supplied 2.5 million households have been declared bankrupt.
Experts predict that up to 20 more could be affected by rising wholesale gas prices in the coming weeks.
Energy companies pay more for electricity and gas because they have to adhere to a price cap.
Energy suppliers who are looking to take on new customers after their existing providers go bankrupt are buying gas at prices far above what they are allowed.
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 for natural gas on the UK markets has shot up in recent weeks but 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 reasonable to expect that that will double in the next few days; Ofgem have made it clear that they expect many suppliers to go out 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 stated, “We believe these costs should be met by general taxation, and that it should also be progressive.”
The increase will be in addition to the large cost increases households already saw due to the energy price cap increasing this month.
Keith Anderson from Scottish Power warned that as many as 20 energy suppliers may go bust
Families on a standard tariff with typical energy usage have seen their bill rise by £139 to £1,277 a year.
Ofgem’s boss warned that the cap, set by energy market regulator Ofgem will be ‘adjusted” again in April.
Analysts suggested the hike could be as much as £800, leaving households paying more than £2,000 a year for energy.
Keith Anderson, Scottish Power boss, stated last week that up to 20 energy suppliers could go bankrupt in the coming weeks.
He called for the removal of the price cap and the replacement with a system in which the bills of the poorest households are capped while others pay the market rate that their suppliers charge.
Wholesale gas prices have risen in recent months due to economies opening from COVID-19 lockdowns, and high demand for LNG in Asia, which has pushed down supplies towards Europe.
16 British energy suppliers have already been affected by collapse this year, affecting over 2.5 million customers.
Nine companies including Symbio Energy and Igloo Energy were struggling to cope with record-breaking gas prices in September.
Households that are attached to companies that have collapsed will be placed in a rescue program. Ofgem will search for a new supplier.
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 as last resort’ system, any outstanding credit balances owed by customers existing or former will be paid. Householders will be transferred under the energy price cap.
Customers who had signed cheaper fixed-price deals before the rise in gas prices were warned that their bills could soar 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.