THE energy industry is reportedly preparing to urge the next prime minister to commit billions of taxpayer cash to help struggling businesses pay their bills this winter.
The i newspaper reports that a draft letter from Energy UK will call for deficit funding for suppliers, the scrapping of VAT from bills and exemptions and reliefs from business rates that were given during the Covid-19 pandemic.
Deficit funding could be extremely costly – with estimates putting the price anywhere between £50bn and £100bn over the next three years.
The draft document also contained a dire warning that the price of gas could stay high “well into 2023 and 2024” and calls for longer-term measures.
Meanwhile, households are facing sky-rocketing bills of £3549 per year in October when the energy price cap rises following Ofgem's announcement.
The next prime minister will be announced on Monday after voting in the Tory leadership contest closes at 5pm on Friday 2 September.
Foreign Secretary Liz Truss is tipped to take over the job from Boris Johnson and has repeatedly ruled out “handouts” for households through the cost of living crisis, instead favouring cutting taxes.
Rival Rishi Sunak, former chancellor, and economists have warned these plans will not help those on the lowest incomes. Meanwhile, UK gas producers and electricity generators are forecast to rake in up to £170bn in excess profits over the next two years, according to estimates from the Treasury.
Both leadership contenders have faced fierce criticism over their lack of proposals of how to deal with the cost of living crisis.
Truss is expected to follow through existing government proposals which would exempt industries like steel, paper, chemicals, and cement from green levies as their industries are energy intensive.
The letter from Energy UK also suggested this policy could be extended to other industries and all non-domestic consumers. Truss has frequently said she is in favour of scrapping the levy completely.
On the deficit tariff fund, the industry body said it would see the Government back loans to energy suppliers, allowing them to meet higher costs and keep bills low.
The letter said: “Such an approach could be used to offset one or many costs currently facing suppliers and consumers, including rising wholesale costs, network costs and policy costs.
“Any deferral would, however, need to be funded.”
Deficit funding would involve commercial banks putting money into a state-backed fund which energy suppliers could draw on to keep bills from rising too high and allow them to cover higher wholesale and other costs.
The money would then be paid back, while keeping bills stable, when costs for suppliers start to subside.
The letter also calls for removing 20% VAT from energy bills.
It is understood that the contents of the letter may change before it is sent to the next PM.
An Energy UK spokesman said it would not comment on the leak.
