Robin Pagnamenta, Energy and Environment Editor
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Britain’s biggest energy companies are holding talks with the Government about a deal to provide subsidised heating and electricity to the 4.5 million people thought to be living in fuel poverty.
Industry chiefs have been summoned to a series of meetings in Whitehall in recent days where they have been attacked for reporting huge profits while not doing enough to help those struggling to pay bills. After the latest price rises the average household fuel bill now exceeds £1,000 a year.
Energy companies spend just 0.11 per cent of their £24 billion turnover helping to tackle fuel poverty, defined as households that spend more than 10 per cent of income on energy.
They have been threatened with a windfall tax on profits if they do not help to fund a nationwide scheme. The Government wants them to contribute to a fund and is considering matching industry payments with taxpayer contributions. The fund would allow for the creation of means-tested, standardised energy tariffs for low-income groups. Alistair Darling is expected to announce further details of the scheme on March 12.
National Energy Action, the charity, claims that half a million more households were plunged into fuel poverty earlier this year following the latest price increases. The Government’s goal of eradicating fuel poverty by 2016 has been thrown into jeopardy.
There is dissatisfaction that in the past two months power companies have been raising prices by as much as 15 per cent while reporting huge profits. British Gas, for example, reported earnings of £571 million last month. Officials within the industry say that the big six energy companies, five of which have already raised their prices this year, are moving closer to agreeing concessions with the Treasury.
“The Government is exercised about this issue and the industry does not want a windfall tax, so they are likely to agree to some kind of deal,” said a source close to one of them. “It’s easier for everyone to swallow.”
He said that the details had not yet been agreed. Other measures that have been proposed include having individual households sign long-term contracts that would encourage power companies to invest in improving energy efficiency in their homes.
Leaders of three of Britain’s biggest power groups — Sam Laidlaw, chief executive of Centrica, which owns British Gas, Paul Golby, chief executive of Powergen, and a representative from EDF, will meet Malcolm Wicks, the Energy Minister, Yvette Cooper, Chief Secretary to the Treasury, and Geoffrey Norris, the Downing Street adviser, today to discuss the proposals. A meeting was held last week with the heads of Scottish and Southern Energy, Scottish Power and RWE NPower.
Several schemes already exist to assist low-income groups, but there is no standardisation and Energywatch believes that they help only one in 15 households living in fuel poverty.
Some companies spend significantly more on the problem than others. British Gas, for example, spends 0.49 per cent of its turnover, while SSE and NPower pay just 0.07 per cent. Energywatch said in January that, if all of the companies matched British Gas’s spending, an additional £72 million could be raised to help poorer households.
Spokesmen for the Treasury and the Department for Business, Enterprise and Regulatory Reform declined to comment.
Ofgem, the energy watchdog, launched an investigation into the power and gas supply markets on February 21 because of growing public concern about rising prices, which the companies have blamed on wholesale gas prices and the need to invest more in low-carbon energy generation.
Power companies are being asked to spend billions of pounds investing in low-carbon generation over the coming years, including nuclear and renewable energy. The industry said that a windfall tax on profits would damage its ability to make investments to secure long-term energy supplies.
Profit sharing
8m Scottish & Southern Energy customers
0.7% Proportion of turnover that it spends on social tariffs
£723m Profits for first half of 2007
16m British Gas customers
0.49% Proportion of turnover that it spends on social tariffs
£533m Profits in first half of 2007
Source: Times database
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Most of your correspondent have fallen into Greedy Gordon's little trap - the taxpayer ISNT going to subsidise energy bills at all, Gordon is going to bully the Energy Companies into doing it for him!
The energy companies are already made give away house insulation, trendy light bulbs etc. so this will be only one more bill. However the only source of money the energy companies have is US, the bill payers - so Gordon is really raising taxes by proxy!
Just like his pretences that Civil Servants pensions nedn't be include in the National Accounts (obviously illegal if real companies did it), and that Northern Wreck doesn't get into the books either, this sleight of hand is basically fraudulent. It helps him cook the books by claiming (i.e.lying!) that he is not raising taxes or spending money on Social handouts - he is simply ordering others to do it for him!
p.s. I do know he pretends that it is all the fault of his glove puppet - yet another example of his idea of the truth!
Mike Bibby, St Albans, England -not EU
Just another half baked idea by Benefits Brown and his cronies.
They would rather give out subsidies and handouts payed for by the hard working tax payers than actually give people the motivation to get off their behinds and work hard for a living to pay their bills.
Maybe we should re-nationalise the power companies so that we ALL pay a fair price for our energy needs.
Richard, Bournemouth, UK
Let me get this right, if I hadnt bought a house and struggled with a mortgage while I bought up my family and at the same time payed into a pension fund having given up smoking as unafordable, taking camping holidays instead of going abroad and only drinking on special occasions I might be poor enough to be subsidised by people like me.
Now relying on pensions I will have to pay 15% more for my energy not forgetting increased rates, petrol and food. Strangely enough I dont want to subsidise anyones power bills, this country and its politicians are failing us all.
mike gee, bournemouth, uk
Yeah, great idea, get the taxpayer to, in effect, subsidise the ultilities. Great idea, after all we all pay so little tax these days, don't we?
Jeremy Poynton, Frome, Somerset
Maybe if the government owned these companies they would have more control.Also,the tax payer would be benefiting from these huge profits.
stephen hulton, eure, france
I think that since the UK Government will not work on additional supplies, and is trying to become green, there is only one solution. All people who cannot afford fuel should assume room temperature, and thereby ' reduce the surplus population '. However since the Government believes in ' Global Warming ', heating should not be problem-should it?.
Desmond Taylor, Houston, USA Tx
Everyone suffers from the high price of utilities. Why should one cross section get subsidies? It's time to nationalise the industry and bring down prices.
Hamad Lone, London, England
It's not that difficult. Just have tiered pricing so that those who are profligate in their energy use pay a premium on the energy they use over a basic amount. Every household could have an energy 'allowance' at a standard rate but usage above this rate would be charged at a premium. That way the basic rate could be a fair price and the admin costs would be negligible.
PR, Cornwall,
Of course there is a simpler and better solution; cut taxes on the poor. Stop the ludicrous and wicked practice of taxing old age pensions. But then Brown might have to slim down his Client State, and that would be unthinkable wouldn't it?
Martin, Welwyn Garden City, England
Everybody needs help with funding for gas and electric prices not just the poor, some of them do not pay for heating if on benefits.
Why should the UK pay higher prices for fuel when those in Europe have had only small rises, we are subsidising Europe. The UkKis always taking the brunt of fuel prices.
f. Simpson, Leics,
Perhaps now is the the time to 'Nationalise' the energy companies to provide a non profit making 'essential service' to consumers with these ongoing severe price increases which not only contribute heavily to inflation but also affect so many consumers cost of living.
Billy Bop, London, UK
So, I will now have to subsidise people's heating, as well as their children, their housing, their policing, their prisons and everything else that these profligate wastrels expect of me as by right, and successive weak governments tell them they should have. Pay decent pensions for the elderly and let the young work, as I have to!
I, like Prince Harry, am sick of this country.
PS. The energy companies need every penny to find new resources or we will all suffer. Ignorant politicians, and an ignorant, and greedy, public will be the ruin of us all, and soon.
Colin Smith, Norwich, UK
Subsidising energy for low-income groups will result in increased energy consumption - the very thing we want to avoid.
Better to subsidise the low-income consumers themselves, by increasing means-tested benefits during periods of high energy prices. This would give consumers the choice of how best to spend the extra cash.
Some will simply continue to buy the extra energy, but others may choose more insulation, or woolly jumpers, a thicker duvet, good Scotch or other hydrocarbon foods, an exercise machine, hot water bottles, or to move to a warmer climate.
Ingenious solutions to the matter of how to maximise the advantage of the energy supplement will abound.
A much less damaging and more creative subsidy.
John Lewis, Isle of Wight, UK
There should be price reductions right across the board if there are going to be cuts. Why should families who are being taxed to the hilt have to pay the full whack of price increases whilst others, who probably pay no taxes at all, reap the profits of others frugality? Another concoction of lies and subterfuge from a morally bankrupt and inept government.
Pete, Lincoln, England
Power giants cash in with huge EU windfall. But they won't be giving any of it to Fuel Poverty Poor Families.
Energy suppliers were attacked last month for scooping a £9bn cash windfall at the same time as unjustifyingly driving fuel bills to record highs.
MPs, consumer groups and poverty action campaigners described the bonanza as obscene.
The windfall comes from a complicated EU initiative called the Emissions Trading Scheme, designed to reduce pollution.
The electricity generators have been given 'permits' to emit climate-warming gases between 2008 and 2012, the second phase of the scheme.
Despite not paying for the permits, they have raised the price of wholesale electricity to reflect their supposed cost. Ofgem, the energy regulator, estimates the firms will make about £9bn from this.
Their extraordinary payday comes as a typical family's typical fuel bill has almost doubled over the last five years to over £1,000.
More than four million Britons are in fuel poverty.
Carl L Witcombe, Gwent, UK
National Energy Action (NEA) â the leading national fuel poverty charity â has expressed bitter disappointment that the Government has not used its Energy Bill, announced last month, to help tackle the problem of fuel poverty through the introduction of a social tariff for vulnerable energy consumers.
NEA is now calling on the Government to deliver its legally-binding commitment to ending fuel poverty â which affects 4 million UK households.
The leading fuel poverty charity called for the introduction of a universal, obligatory social tariff within the Energy Bill requiring energy suppliers to offer advantageous âsocial tariffsâ to their vulnerable customers.
Drastic increases in domestic fuel bills between 2003 and 2006 - 90% for gas and 60% for electricity - have resulted in fuel poverty doubling to a current level of 2.7 million households in England and with npower followed by the other energy companies putting gas and electricity prices up in double-digits.
Carl L Witcombe, Gwent, UK