Households facing £500 hike in energy bills as aid is scaled back

HOUSEHOLDS energy bills are set to jump after Jeremy Hunt scaled back the price guarantee.

The Chancellor’s change to the scheme will see the average bill rising from around £2,500 to £3,000 per year.

Mr Hunt also confirmed that the universal £400 rebate on bills would not be repeated, but replaced by targeted support for those most in need.

Households on means-tested benefits will receive £900, while pensioner households will get £300, and individuals on disability benefits will be given £150.

Households who use alternative fuels such as heating oil and LPG to heat their homes will see their support doubled from £100 to £200.

The energy price guarantee was first introduced by Liz Truss at the start of her brief time in Number 10. It came as energy prices rocketed following the war in Ukraine, and pre-empted what looked set to be an eye-watering 80 per cent increase in the energy price cap.

It limits the amount energy firms are able to charge customers per unit of energy, with the government paying the difference between what households pay and what energy suppliers would charge if the scheme was not in place.

John Swinney, the Scottish Government’s Deputy First Minister said the higher energy price cap would be “unsustainable for many households.”

He added: “The proposals may limit the impact for some consumers, but the UK Government needs to carefully consider the effect a £500 rise in energy bills will have on those who are in or at risk of fuel poverty.”

Citizens Advice Scotland Chief Executive Derek Mitchell said: “Even with the further cap on energy prices, people will come through a harsh winter and then face a shock on the spring as prices go up significantly.

Meanwhile, the Chancellor also extended the UK Government’s windfall tax on energy firms, increasing the rate of the Energy Profit Levy (EPL) for oil and gas companies from 25 per cent to 35%.

As expected, he also brought in a new 45% tax for renewables, biomass and nuclear power generators.

The government said the two taxes would raise over £14 billion next year.

But the raid has infuriated energy firms, with Offshore Energies UK saying it effectively meant UK oil and gas production was being taxed at 75%, and could “drive investment out of the UK altogether.”

Keith Anderson, the Chief Executive of Scottish Power said it would create a “fiveyear-long corridor of uncertainty for investors” in clean energy projects.

Announcing the hike in the Commons, Mr Hunt told MPS he had “no objection to windfall taxes if they are genuinely about windfall profits caused by unexpected increases in energy prices”.

He said any such tax “should be temporary, not deter investment and recognise the cyclical nature of energy businesses”.

The new Electricity Generator Levy (EGL) will be “levied on extraordinary returns from low-carbon UK electricity generation,” which, the Treasury says, will be on anything above £75 per megawatt hour.

The EGL is expected to raise £14.2bn by 2028, while the new EPL rate will raise more than £40bn over the next six years.

However, while oil and gas firms can claim back £91.40 of every £100 of profit by investing it, there is no similar allowance for renewables.

Mr Anderson said he was “deeply disappointed that renewables have been singled out”.

“It seems it’s a recession made by gas, but a recovery to be paid for by renewables.”

Deirdre Michie, Offshore Energies UK’S Chief Executive, said the industry would pay around £80bn in tax between now and 2028: “We remain proud to pay our taxes, but this latest increase means UK offshore operators will be paying a total rate of 75%.

“This rate is so high that it threatens to drive investment out of the UK altogether.”

It seems it’s a recession made by gas, but a recovery to be paid for by renewables