Scottish Power chief Keith Anderson met business secretary Kwasi Kwarteng to propose a £100bn plan to cap annual household energy bills at current levels of around £2,000 for two years, according to reports.
Kwarteng, who is tipped to become chancellor if Liz Truss wins the Tory leadership race, is said to be considering the proposal, the Financial Times reported.
Households face a rise in energy bills on Friday when regulator Ofgem is due to announce the new cap, which is forecast to jump to £3,582 from £1,971 currently. The price cap is set to rise further next year with some analysts predicting increases to over £5,000 from January and as high as £6,500 from April 2023.
READ: Energy cap forecast for next year hits £6,500
Energy companies have warned that households are falling behind on their bills.
Anderson said the cost-of-living crisis caused by soaring energy bills is “bigger than the Covid pandemic”, telling STV News the cost of energy must be frozen.
Meanwhile, former Centrica PLC (LSE:CNA) CEO Iain Conn told BBC Radio 4’s Today programme that the UK is “facing a national crisis, both societally and for the economy because of this energy situation” and called on the government to intervene to “dramatically reduce bills this winter”.
Conn added that he was supporting Anderson’s deficit tariff plan.
Philippe Commaret, managing director of customers at energy supplier EDF, yesterday told the BBC that the UK is facing a “catastrophic winter”, with half of all households potentially falling into fuel poverty unless the government intervenes.
Under the Scottish Power proposal, energy suppliers would cover the gap between the cap and the wholesale price of gas and electricity by borrowing from a “deficit fund”, arranged by the government through commercial banks, according to the FT.
The cost would be gradually paid off either through government borrowing funded by taxes, spread over bills for the next 10-15 years, or a combination of the two.
Rishi Sunak, Truss’s rival for the Tory leadership, said he was “nervous and sceptical” about the £100bn proposal, warning it would exacerbate inflation.
“I think embarking on policies and programmes that add not just tens of billions but tens and tens and tens and tens of billions of pounds on a permanent basis to our borrowing are risky,” he told the BBC.
Kwarteng, who discussed the Scottish Power plan with Anderson in a call on Wednesday last week, said no decision would be made until the Conservative party has chosen a new leader to replace Boris Johnson on 5 September, the FT reported, citing people briefed on the talks.
The proposal could help cool inflation in the wider economy, the report added.