Scots braced for 50% rise in energy bills

Analysis of data from National Grid ESO the London-based privatised operator of the power lines, has revealed the annual cost of supporting the electricity grid - which gets passed onto the consumer - has risen by over £1.45bn from £1.2bn in 2019.

It comes as an energy trade association predicted that energy bills will rise by as much as 50% today as the regulator Ofgem brings forward a decision over the price cap which has a fundamental affect on bills.

But Boris Johnson is said to be poised to provide a safety net for consumers and give the green light to provide billions of pounds in state-backed loans to energy firms in return for a £200 cut in the impact of soaring energy prices on household bills.

Concerns have risen over soaring wholesale gas and electricity prices as renewable generation has slumped helped by the lowest Scottish wind speeds of this century.

The trade association, Energy UK which has been calling on the UK government to intervene to help cut the cost of bills amid has predicted that the price cap overseen by Ofgem could rise from £1277 for a typical household to a record £1,900 today.

Customer research carried out by Public First for the trade association has found that a quarter of respondents say they would not be able to afford the anticipated £50 monthly increase in their energy bills.

The energy crisis has deepened across Europe through a combination of a shortage of natural gas, nuclear outages, declining wind power output, and cold weather boosted prices. An unusually calm summer meant wind turbines produced less electricity, so fossil fuel power plants had to burn more than normal.

READ MORE: Natural disaster: Fossil fuel use soars as Scotland's weak winds stall 'green revolution'

Ofgem is due to announce the energy price cap today which will come into effect on April 1 having brought it forward from next Monday.

It is widely expected to soar at a time when the cost of living is peaking with inflation reaching its highest point in 30 years.

The cap came in as energy wholesale prices continued to climb and was put in place to stop companies from immediately passing those costs on to their customer.

Since October 1 the price cap, set by the industry regulator, Ofgem, has been set at a record £1,277.

After that price cap hike, some 1.5m Scots householders saw their energy bills soar by up to £139.

The cost of buying gas on the wholesale market has rocketed in recent months - rising by over 500% in under a year. Much of this rise occurred since the current price cap was set.

Energy UK say suppliers are losing up to £400-£600 per household because they cannot charge what it currently costs to provide energy to their customers. It says that as a result 27 suppliers have exited the market since August, in addition to Bulb entering special administration.

Citizens Advice Scotland said that the Ofgem announcement will come at the "worst possible time" as prices in the shops soar and incomes stay the same or even fall.

CAS's fair markets spokesman Kate Morrison said: “In Scotland, 1 in 3 of us already find our energy bills unaffordable, and almost half a million people are cutting back on food to afford bills. That’s not a sustainable position for people to be in.

“We need to see urgent government action to protect consumers, particularly those on the lowest incomes, otherwise millions of people face being swept up in a rising tide of poverty, debt and destitution."

The costs from the National Grid ESO has come about through what is called a balancing mechanism, one of the tools it uses to balance electricity supply and demand close to real time.

It is needed because electricity cannot be stored and must be manufactured at the time of demand.

Last year, the grid primarily brought on extra gas-fired power, alongside a small amount of coal power, to cover gaps. Bids are submitted to either increase or decrease generation.

But this has led to a rise in costs caused by the NIA has called the "hidden cost of gas", the winding down of coal power and a rise in "intermittent renewables".

In December it emerged that the weather conditions meant 62% of the nation’s electricity was being generated by gas compared to a normal level of about 40% and it was feared this may increase as the weather bites.

The NIA says that nuclear power would have cut those costs as it provides electricity at £45 per megawatt hour prices for gas-fired electricity have hit £5000 per megawatt hour during the crisis.

Tom Greatrex, chief executive of the NIA said: “The eye watering sums UK consumers will spend to prop up an unstable grid is the price of not investing in nuclear power. We urgently need to get the ball rolling with large-scale stations and a fleet of small modular reactors to provide stable, predictable, clean power and to avoid these costly fossil-fuel induced crises in the future.”

The trade association Oil & Gas UK has previously warned about the importance of maintaining natural gas reserves with demand soaring partly due to low winds, cold weather and issues with Russia cutting the gas it supplies to Germany.

Energy UK’s chief executive, Emma Pinchbeck said: “As our research shows, the expected price cap rise is going to be extremely worrying news for millions of customers. Several ideas to reduce bills have been under discussion but it’s now a matter of urgency that customers get reassurance from the Government that they won’t be left to face this rise alone."