Energy crisis: New taxes on planned gas bills amid warnings of plant closures within days

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Ministers are said to be planning to introduce new charges on gas bills as part of plans to phase out conventional boilers by 2035.

The government will lower the price of electricity by removing green fees from electricity bills and adding new fees to gas bills with the aim of not increasing the overall cost of households, according to reports.

The fee will fund low-carbon heating and is expected to be announced in the much-anticipated Heat and Buildings Strategy, which is due to be published ahead of next month’s Cop26 climate conference.

Energy suppliers criticized the energy price cap on Saturday, saying it would not protect households from an expected rise in costs.

High gas prices have put nine domestic energy companies out of business, forcing 1.7 million customers to search for new energy providers at even higher rates. Energy companies have warned that bankruptcy of suppliers will hit families at higher costs.

Paul Richards, CEO of Together Energy, which he said is currently operating at a loss, told Today’s program on BBC Radio 4: “A price cap as a mechanism is not appropriate for the industry, and does not suit customers.

“When the opposite situation arises and the wholesale price begins to fall sharply, the price that will be passed on to customers in April may seem like a very bad deal, while at the moment the cap price looks like a price that is also good to be honest.”

Richards said that while the energy cap protects customers in the short term, there are costs of between £1 billion and £3 billion as a result of supplier failures that will be imposed on businesses and households.

Ministers have been given special warnings that millions face potential price hikes of more than a third next spring, The Independent revealed yesterday. Energy industry sources said they had told the government that a 34 percent increase in the energy price ceiling might be needed in April to bail out companies at risk.

Gas prices have already soared to record levels as economies around the world recover from the pandemic. Wholesale gas prices on Thursday rose 10 times higher than in October last year. Some analysts expect bills to rise by £400 or more next year if wholesale prices continue to rise.

Ofgem can change the power cap twice a year. It raised the cap by 12-13 per cent to £1,277 a year from 1 October, after raising it in April due to rising wholesale costs.

The British Chambers of Commerce has called for caps on energy prices for small and medium-sized enterprises (SMEs) struggling with rising gas prices. However, David Dalton, chief executive of British Glass, told BBC News that capping the price for SMEs would help but might be “a little too late”.

Green charges for gas bills are due to be announced within weeks

The government is preparing to move forward with gas bill tax plans to finance low-carbon heating within the next two weeks.

The new strategy, which will be published before Cop26 begins in Glasgow next month, includes a new carbon pricing scheme that will raise the price of gas bills.

The government plans to offset the rise by lowering electricity prices – which are much higher than gas – by eliminating green fees on electricity bills over the next decade.

A government source told The Times the plans were “crazy” and Downing Street was failing to appreciate “the reality of the problem we have with energy prices”. The source said, “There is still a feeling that we are getting through and it will be better in a few months. But it is very clear that things will get worse before they get better.”

A spokesperson for the Department of Business, Energy and Industrial Strategy said: “We will be setting our next heat and buildings strategy soon. No decisions have been made.”

Ministers have warned that average annual energy bills could reach £2,000 next year if wholesale prices continue to rise. The price of natural gas is 213p a heat, an increase of 461 percent over last year.

Days for companies to stop production

Leaders of UK energy-intensive manufacturing companies such as steel, glass, ceramics and paper have warned the government that unless something is done about rising wholesale gas prices, they may have to shut down production.

Although talks were held with Business Minister Kwasi Kwarting on Friday, industry leaders said no immediate solutions or commitments had been reached.

Gareth Steess, UK steel chief, told Channel 4 News: “What we are asking Kwasi Quarting to do today on wholesale prices is just to step in to relieve this pressure in the short term, just like in Portugal or Italy for example. Their governments are investing Already billions of euros to help their industries and the UK government has done nothing yet.”

“We can’t wait until Christmas and beyond. Or even a few weeks. We need action now, it has to be quick and decisive action,” Stace said.

“Right now, there’s an energy crisis,” Stace added. “If the government does nothing, there will be a crisis in steel tomorrow.”

BG’s Dalton said some companies were days away from stopping production.

Andrew Large, director general of the Paper Industries Association, said it was clear that there were “serious risks” related to plant shutdowns due to the unsustainable price of gas. He warned that this will have an indirect impact through the supply chain in consumer retail.

Conservative MPs have united with Labor in calls for the government to provide more support in the wholesale gas crisis.

Backbenchers Andrew Bridgen, MP for North West Leicestershire, and Miriam Cates, Penistone and Stockbridge, have backed the government with short-term support for energy-intensive industries. Joe Gideon, the Conservative MP for central Stoke-on-Trent, told the BBC that “potters, brickmakers and materials scientists” also needed government support.

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