Energy supplier calls for bill freeze and VAT cut to ease winter crisis

The government should bring forward energy grants, cut VAT on fuel bills and back a price freeze funded by a £100bn commercial loan scheme to prevent millions of households being pushed into fuel poverty this winter, one of the UK’s biggest energy suppliers has said.

EDF says a new package of government support should be accompanied by an aggressive plan to cut consumer demand.

More than seven million homes in the UK do not have loft insulation and eight million have no cavity wall insulation.

The call comes as consumers prepare for a £1,600 increase in the domestic energy price cap to more than £3,500, expected to be announced by Ofgem on Friday.

The price increase is driven by huge rises in the price of wholesale gas, caused in large part by Russia restricting supplies to Europe following its invasion of Ukraine.

The French-owned EDF supports an industry-wide plan, first proposed by Scottish Power, that would see domestic prices frozen for up to two years, with suppliers able to borrow funds from commercial lenders to make up the difference between customer bills and the cost of buying energy on wholesale markets.

The borrowing, which is estimated could reach £100bn, would be recouped from all bill payers over a decade or more once prices have fallen.

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To buy time while the loan scheme is established, EDF want a £400 grant to all customers, announced in May by then chancellor Rishi Sunak, payable over three months rather than the original six, doubling support to customers but not the cost.

Philippe Commaret, EDF’s managing director of customers, told Sky News: “The price cap increase means that more than half our UK households will be in fuel poverty in January.

“That means more than 10% of their disposable income will have to be spent to pay for their energy bill.

“Put another way, the energy bill for the first quarter of 2023 will be higher than what they used to pay for the full year in 2021.

“This is a crisis, and we can see the early signs of that.

“We have seen a rise of 30% in the number of calls from people struggling to pay their bills.

“We need to find solutions, first to step forward as an energy supplier but also, because of the scale of the crisis, more support from the government.

“The first thing to look at is taxation. It is quite paradoxical that the higher energy bills are the higher revenue, so government must flatten the revenue.

“The second thing is to review the level of the package to support customers, to go beyond the £400 that was announced in May.

“A way to buy time would be to pull forward the £400 for the next quarter to buy time to find a solution for January.

“The other solution is a private initiative to create a deficit fund, where we freeze the bill, and the difference between the cost [of the energy] and what we can bill the customers is funded by private institutions.”

EDF has launched a program to help its customers, with 100,000 of those most in need being contacted directly with ideas to cut demand and information about financial support that is available.

Government sources say the deficit plan has been raised by energy companies in meetings with ministers, but any decision will be for the next prime minister.

Liz Truss has promised only to suspend around £150 of green levies while Mr Sunak has said he would cut VAT on bills.

Labour leader Sir Keir Starmer has said he would freeze bills at the current price cap, with the cost entirely funded by the Exchequer through closing a loophole in the windfall tax, and projected savings triggered by a reduction in inflation.

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