British Gas warns that energy crisis will last for two years

By Simon Jack
Editor for business

Published
Image source, Getty Images

The boss of Britain’s biggest energy supplier said that rising energy prices, which could impact the lives of millions of people, could continue for two years.

Chris O’Shea was the Chief Executive Officer of British Gas Owner Centrica.

He said hopes that bills rising by more than 50% to about £2,000 a year would be short lived may be misplaced.

Concerns about the rising cost of living have been fueled by high energy costs.

The market is suggesting that gas prices will rise for 18 to 2 years,” said Mr O’Shea in a BBC interview.

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Gas is seen by many countries as an interim solution as they transition away from more carbon-intensive energy sources like oil and coal. This creates an international rush for gas when the global economy awakens after its Covid-related sleep.

Gas is an important transition fuel as we work towards net zero,” said Mr O’Shea.

So, if you shut off power plants that are coal-fired in another country, you won’t have enough gas to just quickly turn on.

Political support is increasing for the notion of re-branding gas as a transitional fuel, rather than a conventional hydrocarbon. It has also encouraged increased investments in domestic supply.

But, O’Shea doubted that the higher prices would be affected by increased UK-sourced natural gas.

“I’m not sure an increase in UK supply would have brought the price down from £3 a therm, as it was in December, from 50p as it was a year ago,” he said.

“We import gas from the United States and from Norway. We also bring it from Europe. Qatar is an additional source of energy. Therefore, we aren’t in a position just to treat the UK as an independent energy market. Our market is global.”

Three steps Mr O’Shea proposed that the government take to assist households with the “cost of living crisis”, as described by O’Shea.

  • Instead of adding to future bills, defer the costs incurred by survivors from taking on the customers of many companies which have failed.
  • You can take 5% off of your energy, either temporarily or permanent.
  • To fund the green transition from general taxes to bills, move levies are charged.

He said that all three of these things could be combined quickly and without any regret. That would eliminate half the rise in prices. Then, you can get further assistance for those who are most in need.

Government officials have discussed targeting relief through changes to the warm homes discount plan, which currently offers a one off payment of £140 to those in receipt of certain benefits.

Sir Ed Davey, leader of the Liberal Democrats, has proposed increasing that payment to £300 and widening the number of people eligible.

Prices rising

According to Mr O’Shea, the current scheme design would provide relief for some and result in higher bills for everyone else.

The warm home discount is a cost-sharing scheme where customers pay for the costs. He explained that if the price is increased, it will increase your energy bills. We believe any relief should not come at the cost of energy customers who are already in financial difficulties.”

One alternative is to offer support for energy companies by way of loans or funds. This could be used to borrow when wholesale prices are high, and then pay back as soon as they drop.

However, Mr O’Shea said that this plan relied on the assumption of lower prices. He suggested that it might not be realistic.

Everyone in the UK, regardless of their income or status, is both a tax payer and an energy user. He said that the UK citizen will have to pay for this cost. It is up to government whether the money will be used for energy bills or general taxes.

According to the government, it is deciding what assistance it will provide before the new energy price limit, which is the highest rate that suppliers can charge for default tariffs, becomes effective on February 7.

Source: BBC.com

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