UK looks for compensation for electricity suppliers to protect consumers from high debt

The UK is seeing a major intervention in the electricity market, with the government providing funding to electricity suppliers as oil prices rise sharply to reduce consumer hit.

The idea, promoted by the energy industry, is described by people within the government as “reasonable” and “reasonable”, but acknowledges that there are still many challenges to such a stage.

Under this policy, electricity suppliers will receive payments from the government when ordinary gas prices exceed certain limits so that they will not have to supply consumers.

Some advertisers point out that the idea – known as a temporary pricing mechanism – could generate revenue for a number of years when power companies had to reimburse the government while high prices were sold below the agreed price.

Rishi Sunak, the chancellor, has acknowledged that this may leave the taxpayer more visible if the price hikes rise, but has been in talks with Boris Johnson, Prime Minister, on mitigation measures. the cost of living problems, say officials.

Without taking action with Downing Street, the price of home electricity can rise from £ 1,277 a year to £ 1,900 in April – raising inflation – and comes immediately when tax increases apply.

Johnson faces local elections on May 5 that could determine his political future looking at the “red meat” policies. in the coming weeks to strengthen his weak leadership ahead of the elections.

Other options for reducing energy prices have their drawbacks. The reduction of VAT on domestic power from 5 percent to zero is still on the table, but Johnson has been described as an “unreasonable tool” to help rich and poor families.

Ministers too have failed to provide government-sponsored loans to electricity companies. Some figures put the amount of debt required at $ 20bn and one person who summarized the negotiations said: “Some companies can no longer be at risk of debt.”

Sunak is looking to provide a range of services to poor families – perhaps through the expansion of warm discount home system – but ministers are looking to make significant progress.

Emma Pinchbeck, chief executive of Energy UK, confirmed on Monday that retailers are discussing with the Treasury a way to reduce inflation for consumers.

“The Treasury government has asked companies to look at ways to distribute gas prices only in the long run,” he told BBC Breakfast.

He also noted that under such a system, in “the year when a [wholesale gas] The cost is low, companies pay the government and in the coming year, the government helps companies to disburse the money ”.

Government officials agree that there is no easy way to deal with the sharp rise in electricity prices, but says the plan could offer hope that the Treasury will recover when oil prices fall.

“If it had not started, we would not have spoken to the electricity companies about this,” said one person briefly in a discussion with the Department of Commerce and Treasury. “There are a lot of challenges to bring, but it’s a good way.”

The process can be similar to design “various contractors” which helps to generate renewable energy in Britain by ensuring a lower electricity price for power producers.

But the idea is not widely known by retailers. A senior company official said “it is not clear how you can solve it and how you can solve it?”

The official added that such an approach could be “closing the market to competition” because no buyer would want to go to the real estate market as the sustainable approach protects the prices of households whose income is set by the British value chain.

Investec, a cash-strapped bank, on Monday revised its forecast for April’s rise in the price target, which is due to announce next month, following a fall in inflation in recent weeks. It now expects an increase of £ 630 to $ 1,907 per household against the previously reported £ 2,000.

But the bank’s energy analyst Martin Young warned that the cap would have to rise again to $ 2,100 in October, when it was renewed. Some experts he directs the cup is expected to rise in October to reach £ 2,300- £ 2,400 depending on future strong prices.