Windfall profits can’t continue, warns think tank boss

Non-gas-fired generators cannot be allowed to continue making windfall profits because it will add pressure on the bills support being brought forward by the government, the head of an influential economics think tank has warned.

Torsten Bell, chief executive of The Resolution Foundation, was one of a string of witnesses to give evidence at a hearing into the cost-of-living crisis held by the Business, Energy and Industrial Strategy Committee on Tuesday morning (6 September).

Expressing concern about electricity generators, like wind farms and nuclear plants, which have been making big profits by piggy backing on the wholesale prices commanded by gas-fired powers stations, he said: “Anyone generating electricity and able to sell it at current spot prices and not using gas isn’t something that can carry on through this winter.

“It will put much more pressure on the package the government announces because you will either use borrowing to fill the gap or you will end up with a bigger, long term drag on energy bills in the future.

“Windfall taxes or regulating down prices is how we avoid all the pressure going on future generations because those doing well today should be paying more,” Bell said.

The government is reported to be unveiling an energy support package on Thursday, which will freeze typical domestic energy bills at £2,500 per year for 18 months, with businesses in line for support over the winter too.

Clare Moriarty, chief executive of Citizens Advice, told the same hearing that while her organisation would normally expect demand for help with energy bills to fall during the summer, they had seen “very large numbers of people struggling” during recent months.

“Most significantly, we are seeing record levels of people who can’t top up prepayment metres in the joint hottest summer ever recorded.

“People are very worried looking ahead to October. We estimate one in five people won’t be able to pay energy bills and we are seeing very large numbers of people who simply can’t afford to keep the lights on and food on the table,” she said, adding that “not all energy suppliers are doing as much as they could to look after customers’ properly.”

Joanne Cairns, head of research and policy at Usdaw, told the committee that a survey of the shop workers’ union membership included the “extremely worrying” finding that 30% will not turn on the heating this winter due to fears about energy bills.

The same survey showed that 63% said they would “significantly” cut down on heating and 40% would reduce consumption of other essentials, such as food, she said.

The committee also heard from businesses, many of which are exposed to huge increases in energy bills this autumn as fixed term contracts are renegotiated.

Dave Dalton, chief executive of British Glass, said his manufacturer members were typically being quoted sevenfold price increases in new energy contracts, which he described as “untenable”.

Dalton, who is also chair of Energy Intensive Users Group, said UK glass companies’ combined power bill had increased from £212 million in 2020 to a projected £1.3 billion this year, nearly as much as the industry’s entire £1.5 billion value.

He called for the government to open a dialogue with energy intensive industries to identify ways they could cut pressure on the gas and electricity networks, such as by cutting or switching demand for periods.

Karen Betts, chief executive of the Food and Drink Federation, said her members would be “reassured” by more detailed conversations about potential disruption to energy supplies.

Tina McKenzie, UK policy and advocacy chair at the Federation of Small Businesses, said many of her member companies were in a state of “collective shock” about increased bills.

Giving as an example one firm with a turnover of £40-50,000 per year, which has been quoted £15,000 by a supplier, she said: “These bills are landing and they don’t have the cash to pay the bill, which is why the only thing they can think of is to close the door.”