More tough times may lie ahead for British households, looking at another winter of high energy bills piled on top of the economic gloom of an ongoing cost-of-living crisis, according to the head of the UK’s biggest household energy supplier, Centrica Plc.
“My worry is that the worst is still to come,” Chief Executive Officer Chris O’Shea said in an interview. “We are seeing direct debits being canceled. We are seeing people struggling.”
While global energy prices have cooled off the highs of last year, retail bills are still nearly double the levels Britons paid before Russia’s invasion of Ukraine. Higher rents, mortgage rates and everyday expenses are adding to the pain, O’Shea said. British Gas, owned by Centrica, serves 7.5 million customers.
Higher interest rates are already eating into household budgets, while unemployment has picked up, adding to concerns the economy is heading into a rocky end to 2023.
The amount of money British households owe their energy suppliers jumped to a record £2.6 billion ($3.2 billion) this summer. And consumers risk additional costs as the energy regulator Ofgem is considering adding a one-time adjustment to the April energy price cap to reduce the risk of suppliers going bust or leaving the market because of unrecoverable debt.
“The regulator has a difficult situation, but they’ve created this market,” O’Shea said, adding that if capital requirements were stricter, many suppliers in the UK would not be able to meet them. “If everybody is losing money in the market, the market will collapse.”
There are strict measures in place in the UK to prevent energy companies from cutting off customers unable to pay their bills. Ofgem has recently tightened rules around when a pre-payment, or pay-as-you-go meter can be installed, making it harder for companies to recoup debt.
Households could see costs jump as much as 8% in the depths of winter with Ofgem’s price cap set to be £1,976 ($2,402) in the three months starting Jan. 1, according to Investec Plc. That translates into a monthly bill of £226, which remains significantly higher than pre-crisis levels.
The government stepped in to protect households and businesses from last year’s record power and natural gas prices. But the support ended earlier this year, and energy suppliers, including Centrica, have urged the state to renew the assistance for those still struggling.
There have been discussions with the government about a social tariff, but they haven’t concluded yet, O’Shea said.
The political costs of higher-than-expected inflation were evident when the opposition Labour Party overturned huge Conservative majorities last week to win two parliamentary seats ahead of a general election expected next year.
