The bill for Sunak’s household energy rebates could be eye-watering
The advance version of Rishi Sunak’s grand bargain for the retail energy sector, to be presented in full on Thursday, sounds a reasonable fudge. All households will probably get a £200 rebate off their bills, to be funded via vast loans to the supply companies; and low-income and vulnerable customers will get further support from the public purse.
In its own terms, it’s coherent: knock the sharp edges off April’s hike in bills and pray that wholesale gas prices plunge before next winter. But let us hope the chancellor answers this question: what’s plan B if wholesale prices don’t fall over the course of the year?
That, unfortunately, is how the future currently looks. Regulator Ofgem, also in action on Thursday, is likely to lift its price cap from £1,277 to £2,000-ish but worse is coming down the track. Analysts currently project that the mechanical formula will spit out £2,300-ish for an average dual-fuel bill in October’s adjustment.
If that materialises, would Sunak’s sanction even more loans to defer the moment at which the full blast of higher prices is felt by high-income customers? Remember that Bulb already sits on the state’s book, supported by a £1.7bn loan of its own. If the £200-a-household exercise involves £5.5bn (which is how the maths on 27m homes comes out), it requires little imagination to see how the state’s lending exposure could quickly approach the £10bn mark. That is a serious sum, especially when more corporate casualties are expected.
Doing nothing was not an option for Sunak, but finding a safe exit from this mammoth intervention could prove the hardest part. The bet here is not every billion will be returned to the Treasury.
The cynical way to view chief executive Nick Read’s latest pitch to
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