ENERGY bills could be slashed by £400 this winter in a plan to cut the price cap amid the cost-of-living crisis.
Chancellor Nadhim Zahawi has reportedly asked Treasury officials to work on a multibillion-pound relief package, which could lead to a drop in the energy price cap from January.
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The inflation-busting measure will give Ofgem better say over what the price cap should be while scrapping an allowance that energy suppliers charge customers, according to The Sunday Times.
The publication reported that the cost will instead be covered by the Treasury and the Bank of England.
According to treasury estimates handed to Zahawi and other ministers this week, the new proposals could lead to a reduction in the price cap and much-needed relief for stretched British households battling the cost-of-living crisis.
The scheme won’t come into play before the next price cap rise in October, but could be in place by the beginning of 2023.
Senior government sources told The Sunday Times that the proposals were being worked on for either Liz Truss and Rishi Sunak to potentially announce when one of them becomes the new Prime Minister on September 5.
Meanwhile, Keith Anderson, chief executive of ScottishPower, has proposed freezing bills at their present level of £1,971 for two years.
That could see suppliers cover the gap between this and the wholesale price by borrowing from a “deficit fund” supported by commercial banks and repay the debt over 15 years.
The cost of the repayments would then be passed onto customers over the same period or moved into taxation.
Mr Anderson’s idea had been floated in April but was reportedly rejected by then Chancellor Rishi Sunak in favour of a £15billion pay-out to households.
It comes as recent estimates published last week predicted the cap would rise to an eye-watering £3,500 in October, before increasing to more than £4,200 in January.
This could leave households paying more than £500 in the first month of the new year.
The cost of an average family’s annual energy bill could reach nearly £5,300 from April if wholesale prices for gas and electricity do not fall soon.
This is the worst forecast yet for the millions of households set to face crippling bills this winter.
The energy price cap works by setting a limit on the maximum amount suppliers can charge for each unit of gas and electricity.
It’s not a cap on how much you can be charged for the energy that you use – so if you use more expect to pay more.
While the predictions are for grim reading, it’s important to recognise the figures may change.
The new prediction follows the news that some have some energy customers have already seen hikes to their direct debits now, to take into account the future price hikes.
Chancellor Zahawi and Business Secretary Kwarteng met with energy company chiefs yesterday.
A Government source said “no option was off the table” as to how the firms’ colossal profits could be targeted to make bills fairer.
