Oil and gas companies have handed shareholders almost £200bn since 2010 and should be hit with a windfall tax to cap heating bills that are set to rise by as much as £500 a year, according to a report on the finances of the UK’s energy sector. Shell and BP are among companies that have seen their profits boosted in the last year as wholesale gas prices rose by as much as nine times and petrol prices jumped to record highs, leading to calls for them to help limit a £20bn bill faced by UK households. A report for the left-of-centre thinktank Common Wealth found that Shell and BP channelled £147bn to shareholders via dividends and share buybacks over the past decade, with North Sea producers and the big six energy suppliers contributing another £47bn. Business secretary Kwasi Kwarteng told MPs last September the government was considering a plan for a £2.6bn windfall tax on generators and energy traders that stood to gain from the energy crisis. It is understood Rishi Sunak, the chancellor, is still considering measures to limit rising bills, including a windfall tax, but with two weeks until the regulator, Ofgem, announces how much a cap on energy bills will rise in April, he has yet to settle on a final package. The chancellor, accused of being “missing in action” while energy costs soar, is under pressure from Tory MPs to cut state spending and reduce Britain’s debts. He is known to favour a loan scheme for energy suppliers, giving them the funds to cushion the blow this year, with the addition of a small subsidy to the poorest households using the Warm Home Discount Scheme.
Observer 16th Jan 2022 read more »
The really big shock this April will be utility bills – as the energy price cap is lifted, so energy companies can charge households more. Soaring wholesale gas prices means the average household utility bill of £1,277 is set to exceed £2,000 – a massive £700 increase that will hit millions of ordinary families hard. Little wonder high levies charged on household energy use diverted towards renewable energy industries are coming under serious scrutiny. Around 25pc of utility bills now comprise such “green subsidies” – with the income of hard-working households being channelled elsewhere, not least huge landowners hosting sprawling windfarms. Many Tory backbenchers, disdaining Johnson’s “net zero” agenda, now want such levies abolished. I can’t see that happening – at least not in time to ease the April cost-of-living pinch-point, ahead of those vital elections in May. Another way to cut bills would be to extend cheap government loans to cash-strapped energy companies – many of which are suffering, with wholesale gas prices above what the current price cap allows them to charge. Some 25 energy providers have already gone bust, reducing future scope for much-needed competition. Scrapping VAT on household energy bills during these winter months and into the spring would cost around £2bn, less than Sunak’s 2021 VAT windfall. Now we’re outside the EU, and fully control our own taxes, fuel can be zero-rated instantly – allowing Johnson to present the cut as a Brexit dividend. While VAT on energy bills is just 5pc, that’s over £100 on a £2,000-plus bill – which is worth having. And while there is no guarantee energy firms would pass on the full VAT reduction, if ministers move fast, the regulator Ofgem can include the tax cut when setting the April price cap, due to be announced on February 7.
Telegraph 16th Jan 2022 read more »
Energy tariffs that were supposed to save homeowners hundreds of pounds a year on their bills now cost three times more than traditional gas and electricity deals. The gas crisis has rendered specialist smart meter tariffs, once lauded as the future of energy pricing, effectively redundant as prices have risen across the board. So-called “time of use” smart meter tariffs, which lower the price of electricity when demand is low and increase the cost in times of high usage, were sold as one of the key benefits of the smart meter rollout. In normal times these deals would save the typical family £210 a year compared with the average variable tariff from one of the big six energy firms, according to supplier Octopus. Customers could even get paid to use electricity when energy prices dropped so low they became negative. However, following the spike in wholesale energy costs, these deals now mostly charge customers close to the maximum rate possible, whatever time of day they use their appliances.
Telegraph 16th Jan 2022 read more »