Electricity producer SSE is proposing a plan to help with household bills

Electricity producer SSE is proposing a plan to help with household bills

Power companies can mitigate rising energy costs for British households by agreeing to sell some of their output at fixed prices “far below” current wholesale prices, British energy group SSE said.

The FTSE 100 company acknowledged that utilities could play a role in easing rising energy costs for families, although it also joined calls for the government to “artificially” suppress domestic energy prices by providing payments to suppliers so they can avoid passing on large increases to the UK price ceiling.

Writing in the Financial Times, SSE chief executive Alistair Phillips-Davies proposed a voluntary scheme that would see low-carbon power companies that own existing assets such as wind and nuclear power stations agree to fixed prices well below at current prices for wholesale energy for production they did not commit to sell in advance.

Such fixed-price contracts could last for 15 years, helping to bridge the “gap” until other long-term plans to reduce the price of electricity in Britain are put in place, Phillips-Davies said. For example, the government has set targets for low-cost, low-carbon technologies such as offshore wind by 2030 as it seeks to reduce Britain’s dependence on expensive imported gas.

The radical proposal would help take the heat off power companies, which fear a windfall tax if they make huge profits while households face the greatest pressure on their income in a generation, fueled by spiraling energy costs. Oil and gas companies operating in UK waters have already been hit by the new 25 per cent levy.

Allies of Nadhim Zahawi, the chancellor, who held an urgent meeting with energy companies, including SSE last week, said he was keeping alive the prospect of a windfall tax if producers are seen returning excess profits to shareholders.

The intervention by Phillips-Davies comes before Ofgem announces a new energy price cap on August 26, which dictates bills for the vast majority of households. Current forecasts suggest the energy regulator will announce a rise to more than £3,600 a year for a typical household from October 1 from the current £1,971.

Phillips-Davies said renewable and nuclear generators would pay the difference between the agreed fixed price and current wholesale prices back into the pot “which could then help pay off any debt incurred by capping [household] prices”.

SSE owns renewable energy generation, such as wind farms, as well as electricity grids and gas-fired power plants in Britain. After that, it no longer sells electricity and gas directly to UK customers sold her retail business to This in 2020.

The proposition echoes a scheme proposed earlier this year by academics from the UK’s Center for Energy Research, who estimated it could shave more than £300 off annual household electricity bills.

Academics have argued that most existing large-scale renewable energy projects still benefit from a legacy support scheme that pays producers a subsidy on top of prevailing wholesale electricity prices.

Phillips-Davies insisted the government will still have to play its biggest role in helping families this winter, as he backed a proposed £1bn loan scheme to help curb domestic energy prices.

The scheme, first proposed by ScottishPower in April, is gaining support as concerns over energy bills rise. Phillips-Davies added that the loan scheme should be seen as a “mortgage” rather than a “grant”.

“As with the Covid emergency support, it would rely on relatively cheap government borrowing, but with a plan to pay off this debt as we complete our energy transition and prices fall,” he added.

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