How will Liz Truss help businesses and households with soaring energy bills?
Liz Truss’s plan to help consumers and businesses with their energy bills this winter appear to finally be taking shape. The new prime minister reportedly plans to keep bills for a typical households at or below the current price cap level of £1,971. Bills had been due to go up 80% to £3,549 from 1 October and potentially as much as £5,000 next year.
Exact details of the policy are yet to be announced but there have been estimates it could cost as much as £130bn over the next 18 months. In reality, predicting the cost is difficult as it depends on the volatile price of natural gas.
A freeze on bills for consumers to cover this winter and maybe all next year too. The squeeze on gas supplies exacerbated by Russia’s invasion of Ukraine means there are few signs prices are likely to ease soon, forcing the government to act. This policy would see ministers overrule the energy regulator, Ofgem, and effectively set the price households pay. National Energy Action estimates that keeping the cap at its current level would prevent 4.4m entering fuel poverty from October.
The government would guarantee financing to energy suppliers to cover the difference between the cap and what they would have charged. Under one scheme, first mooted by ScottishPower, commercial banks would put money into a state-backed fund. Another option would be a fund directly held by the Treasury. Retail suppliers could then draw on this fund to freeze customer bills. The debt built up by suppliers would be repaid by consumers, either through a surcharge on bills or from wider taxation over a 10- to 15-year period.
It is understood the Treasury likes the commercial bank option because it removes the debts from its balance sheet. For companies, the plan would
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