Electricity companies can mitigate soaring energy costs for UK households by agreeing to sell some of their output at fixed prices “well below” current wholesale rates, the UK energy group has said. SSE.
The FTSE 100 has admitted power companies could play a role in easing soaring energy costs for families, although it has also joined calls for the government to ‘artificially’ scrap prices energy markets by making payments to suppliers so they can avoid passing on huge increases. within the price cap of Great Britain.
Writing in the Financial Times, SSE chief executive Alistair Phillips-Davies proposed a voluntary scheme whereby low-carbon power companies that own existing assets, such as wind farms and nuclear power plants, could agree fixed prices well below current rates for wholesale generation power that they have not committed to sell in advance.
Such fixed-price contracts could run for 15 years, helping to bridge the ‘gap’ until other, longer-term plans to lower the price of electricity in Britain are established, said Phillips-Davies. For example, the government has set targets for cheap, low-carbon technologies such as offshore wind by 2030 as it seeks to reduce Britain’s dependence on gas imported expensive.
The sweeping proposal would help relieve power companies, which fear a windfall tax if they turn in huge profits as households face the biggest squeeze on income in a generation, fueled by soaring costs Energy. Oil and gas companies operating in UK waters have already been hit with a new windfall tax of 25%.
Allies of Nadhim Zahawi, the Chancellor, who held an urgent meeting with energy companies including SSE last week, said he entertained the prospect of a windfall tax if producers appear to be returning excess profits to shareholders.
The Phillips-Davies intervention comes ahead of Ofgem announcing on August 26 the new level of the energy price cap, which dictates the bills of the vast majority of households. Current forecasts suggest the energy regulator will announce a rise to over £3,600 a year for a typical household from October 1, up from £1,971 currently.
Phillips-Davies said renewable and nuclear generators would pay the difference between the agreed fixed price and current wholesale rates into a pot “which could then help pay off any debt created by the cap [household] prices”.
SSE owns renewable energy generation, such as wind farms, as well as electricity grids and gas-fired power stations in Britain. It no longer sells electricity and gas directly to UK customers after selling its retail business to Ovo in 2020.
The proposal echoes a scheme suggested earlier this year by academics at the UK Energy Research Center who estimated that more than £300 could be cut from household energy bills a year.
The academics said most existing large-scale renewable energy projects still benefit from a legacy support program that pays producers a subsidy on top of prevailing wholesale electricity prices.
Phillips-Davies insisted the government should still play the biggest role in helping families this winter as it backed a proposed £1billion loan scheme to help suppress the prices of energy on the internal market.
The scheme, first suggested by ScottishPower in April, has grown in popularity as concerns about energy bills have grown. Phillips-Davies added that a loan scheme should be considered a “mortgage” rather than a “handout”.
“As with emergency Covid support, it would rely on relatively cheap government borrowing, but with a plan to pay down that debt as we complete our energy transition and prices come down,” he said. added.