The chief executive of parent company British Gas has said all households in Britain will face higher energy bills if suppliers are unable to prevent customers struggling with huge debts.
Centric CEO Chris O’Shea’s warning follows across the industry moratorium about the forced installation of pre-paid meters in February after British Gas was embroiled in a scandal involving third parties breaking into vulnerable people’s homes to install the devices.
In his first major interview since the scandal, O’Shea admitted mistakes had been made but argued the government needed to find a fair way to spread the costs of supporting the most vulnerable in society.
“It says very well that we will stop X, Y and Z. . .[but]ultimately, if you have people in categories where you can’t install a backup meter, then the general population is paying for their energy,” he told the Financial Times.
On Tuesday, Centrica said in a trading update that its performance has been strong so far in 2023 thanks to “significantly higher” earnings from British Gas, although earnings per share are still expected to fall by around 30 percent from last year.
The support from British Gas comes from a regulatory change that allowed energy suppliers to recover some of the costs of supplying customers during the energy crisis.
OfgemThe regulator is considering allowing suppliers to charge additional surcharges to all energy bills to cover the cost of bad debts for struggling households as part of changes to limit the installation of pre-paid meters.
“If this causes bad debts to rise, Ofgem will have to raise the price [suppliers can charge]O’Shea said.
Trade group Energy UK estimates that the moratorium on forced prepayment installations is adding £30 million a month to customer debt across the country – the equivalent of around £1 per household per month. Bad debt costs currently represent about 1 percent of typical accounts.
O’Shea also said he remains “very” concerned about the country’s “energy resilience” given the UK’s lack of gas supplies.
Centrica reopened Coarse, Britain’s largest gas storage facility, in October last year, having closed it for new injections five years ago. But it warned at the time that it was not a “silver bullet” to solve energy security problems in the winter months, as the site was only able to meet 1 per cent of demand on a cold day.
O’Shea was “disappointed” to be speaking with government over support for further development Rough fell through last year. “I am very concerned about the UK’s energy resilience,” he said. “I am very concerned about the real shortage of gas supplies. We have less than 10 days of peak winter demand.”
The warning comes as an initial impact energy crisis — caused by Russia cutting off gas supplies to Europe following its all-out invasion of Ukraine — is starting to ease.
But with bills still expected to remain well above pre-war levels in Ukraine for several years, the government is looking at ways to protect lower-income households – such as introducing a “welfare tariff”.
O’Shea argued that the “policy costs” of such a move should be funded through general taxation, rather than the usual formula of adding them to energy bills.
Centrica is one of the UK’s biggest energy companies, with assets ranging from North Sea oil and gas fields, an energy trading division and a 20 per cent stake in a company that operates UK nuclear power plants.
O’Shea echoed widespread industry complaints of “real problems” getting new grid connections, which he said was delaying investment in new power generation capacity. “It’s very frustrating because it’s very easy to fix,” he said.
He called on the government and the regulator to ensure developers have to put down a large deposit to be put on a waiting list for new grid connections to weed out those with “no financial substance”.
Last week, Centrica opened its first major solar farm, an 18 megawatt project in Wiltshire, and plans to build up to 900MW of renewable and flexible generation facilities by 2026, including gas-fired plants.
O’Shea said he was interested in investing in Sizewell C, the new nuclear power station on the Suffolk coast, depending on the level of risk and reward for investors to take. Project leads EDFthe French state-owned energy company that holds the remaining 80 percent stake in Britain’s existing fleet of nuclear power plants.
But he added that he was “eternally grateful” that the company had not invested in Hinkley Point C, the nuclear power station EDF is building in Somerset. afflicted delays and cost overruns. The 3.2GW plant is being built using a different financing model, meaning investors must wait for it to start generating before seeing any returns.
But before making any decisions on long-term investment plans, O’Shea said he needed to spend more time on the sensitive issue of installing a forced prepayment meter. Ofgem has set out a number of conditions for each supplier to resume forced repayments.
“There’s no danger,” O’Shea said. “We made mistakes in this – very public mistakes – I’d rather take the time to put that right than go back to it.”