Deficit scheme still possible before October cap increase

There is still time for the government to implement a tariff deficit scheme before October’s price cap increase, a Scottish Power boss has insisted.

Andrew Ward, the company’s UK retail chief executive, was speaking to Utility Week in the wake of last week’s announcement that the cap is to increase by 80% to £3,549 per year for a typical dual fuel customer.

Scottish Power’s chief executive Keith Anderson has been one of the industry’s strongest advocates of a deficit fund tariff, which would freeze the cap at current levels at an estimated cost of around £100 billion over two years. This would then be recouped over a period of between 15-20 years, when prices have stabilised.

Asked whether it is now too late for the government to implement the measure before October’s increase, Ward said he believes the tariff deficit scheme “is the only thing now that we’ve got left”.

He said: “Can we do something about it? Absolutely we can. But I would suggest that we’ve been sleeping a little bit here. We’ve been talking to the government and to Ofgem for a number of months now about this and we need to act and we need to do something about it right now.”

Ward explained that the company is already loading the new price cap data into its IT platforms and updating customer prepayment meters (PPM) to reflect the increased costs. Furthermore, the retailer is preparing letters to send to customers communicating the new cap.

He added: “If we’re going to do the tariff deficit, what we asked to be considered was putting a halt on that for the whole of industry, even for two weeks until we see what’s happening with the new prime minister coming into post. We can then hopefully, if there was an intervention the government was willing to do, update all of our calculations, all of our assessments of the new prices.

“What does that do? It stops a huge amount of waste and a huge amount of stress across customers in the UK who will be receiving these communications from us, looking at what their energy prices are going to be only to be told potentially two weeks later, it’s going to be a lot less.

“So yes, we can still do it. But realistically to get it for 1 October the cut off is probably about 9 September from a Scottish Power perspective. And it’s going to be really, really difficult if we are much beyond that to do anything for 1 October.”

In response to the comments, a spokesperson for the Department for Business, Energy and Industrial Strategy (BEIS), said: “We know the pressures people are facing with rising costs, which is why we have continually taken action to help households by phasing in £37 billion worth of support.

“We are giving a £400 discount on energy bills this winter and 8 million of the most vulnerable households will see £1,200 extra support.

“While no government can control global gas prices, over 22 million households are protected by the price cap which continues to insulate households from even higher prices.”

The full interview with Andrew Ward will be published on Utility Week’s website later this week.  

Consumer protection will be discussed in more detail at Utility Week Forum this November. For more information and to book your place, see our website.