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The energy regulator should use some of the £4 billion earned in windfall profits by network companies to reduce bill payers’ debt. MPs Said.
In a report released on Wednesday, the Energy Security and Net Zero (ESNZ) committee called it “completely inexcusable” that families are forced to choose between eating and heating, while the companies behind Great Britain’s gas pipes and power lines reap huge profits.
Britain faces an energy affordability crisis after electricity and gas prices rose since late 2021, driven by the reopening of economies. covid And Russia’s invasion of Ukraine.
A cross-party group of MPs is considering how Government The UK could support bill payers as the first step of its two-part investigation into the cost of energy.
Household energy debt has increased to £4.43 billion, ofgem The figures, shown last month, are a record figure that has more than tripled in five years.
The regulator reported that 1,133,683 electricity customers and 926,545 gas customers were in debt without any repayment arrangement.
Families are facing an extra £145 a year on their bills to make up the shortfall due to group lending.
But the ESNZ committee said that while millions of people are struggling with energy prices, “there is no shortage of money in the wider energy system”.
Citing figures from Citizens Advice, MPs said the energy network had made windfall profits of around £4.15bn from better-performing network price controls.
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Bill Esterson, chairman of the committee, said: “British energy consumers are £4 billion in debt, while network companies have made excess profits of more than £4 billion.
“These profits have come simply from better-performing price controls, while millions of families ration electricity or go without heat.
“We are calling on the Government to use these windfall profits to fund a permanent energy debt relief scheme, recognizing the deep and lasting impact of the energy price crisis.”
Ofgem, which does not have tax-raising powers, would have to recommend introducing a windfall tax-like arrangement to the Department of Energy Security and Net Zero, which would then have to put forward a proposal to Parliament.
The committee also recommended Ofgem launch an ambitious energy debt relief scheme, consulting before spring on a program with provisions for permanent protection against debt and debt forgiveness.
It also says Ofgem must set the energy price differential at the same level for all customers regardless of their payment method, with effect from the first quarter of next year.
MPs called on the government to set ambitious new targets for smart meters by the end of this year, focusing on meter reliability, not installation numbers.
He also called the standing charge a “regressive tax on energy access”, arguing that customers should be exempted from the gas standing charge if they convert their home to electric heating.
UK household energy prices are about 75% higher than before the energy crisis, and industrial electricity prices are the highest in Europe.
This has led to record levels of household energy debt and had a devastating impact on entire industries.
The second part of the committee’s inquiry will examine how costs such as upgrading the grid and building new sources of energy generation are driving rising household bills as well as how bills can be reduced overall.
An Ofgem spokesperson said: “This issue (a £4 billion windfall) arose due to very high levels of inflation in early 2020, not seen for 30 years, and we made clear to network companies that they should use this to strengthen their balance sheets to deliver benefits to consumers and support those who need it most.
“Ofgem has since implemented regulatory changes to reduce costs across the energy system by securing the best deal for customers, reducing industry profitability and setting tougher targets on service performance.
“The decision not to apply these changes retroactively was based on the risk that reopening price controls could lead to other costs to consumers that outweigh the potential benefits of any benefit recovery.”
On debt relief, he said: “We are working rapidly on plans to launch a debt relief scheme that can help struggling households get back on track and repair some of the debt built up as a result of the crisis. We are continuing to engage with stakeholders to take this work forward.”
And on permanent charges, he said: “The costs covered by the permanent charge must eventually be paid.
“They cover the cost of transporting energy to your home or business, and ensure we continue to invest in networks, so they are ready for the future, and we have a stable and secure energy system.
“We can’t remove these charges, we can only shift the costs around – but we are currently reviewing how future energy costs are changing, and exploring whether alternative approaches could provide better protection for consumers.”
A Department for Energy Security and Net Zero spokesperson said: “We are making reforms that put consumers first, providing stronger protections, including automatic compensation when energy companies abuse bill payers.
“We are working urgently with Ofgem to take the debt out of the energy system. To help people with the cost of living, we are extending the £150 Warm Home Discount to six million homes this winter.”