ScottishPower chief Keith Anderson's call for axing of energy cap is rejected

It said that the cap is the best way of protecting millions of households across the country, despite recent record rises in energy bills that happened when the price cap was in place.

Scottish Power chief Keith Anderson wanted the cap replaced with a social tariff to ease the price hikes for those in fuel poverty, paid for by those who can afford to pay or through government support.

The ministers move came as a new study found that 220,000 older households in Scotland will have insufficient income to cover their essential spending this year.

With 150,000 pensioners already living in relative poverty in Scotland, Age UK estimates that the poorest older households in Scotland will need to drastically increase the percentage of their net income spent on essential goods and services from 70% in 2021-22 to 87% in 2022-23 due to higher costs of living.

Age Scotland warned that without major interventions rising bills, surging inflation and increased costs of living will continue to push older households into poverty, poorer health and financial insecurity.

The price cap on energy bills was brought in by the energy regulator Ofgem in 2019 to protect British households from rip-off gas and electricity tariffs and it had the ability to extend annually until 2023. Next year the rules were set to expire.

Around 1.5m Scots households saw their energy bills soar by up to £693 a year in April after Ofgem hiked the price cap by the biggest increase yet.

It meant that the three in four customers on default tariffs paying by direct debit saw an increase of £693 from £1,277 to £1971 while the rest who are on prepayment meters - and tend to be among the most vulnerable - have seen a rise of £708 from £1,309 to £2017.

The sharp 54% rise, which will impact half the population, was said to be driven by a record rise in global gas prices, with wholesale prices quadrupling in the last year.

The latest predictions from consultants Cornwall Insight is that the cap could rise to £2,595 in October, and stay at around £2,300 until April 2024. Although these predictions are based on early data.

READ MORE: ScottishPower chief calls for urgent bills support for poorest over energy crisis

The ScottishPower chief and other energy firm chief executives told MPs investigating energy prices last month that there needed to be “unprecedented” measures to prevent a fuel poverty crisis next winter.

Mr Anderson had said the effect on further predicted price rises in October will be “truly horrific” and that the size and scale of the problems was “beyond what I can deal with”.

Mr Anderson had called for the cap system - blamed for the failure of dozens of competitors as they were unable to pass on huge rises in raw energy costs - to be scrapped in favour of a social tariff that would see the better off pay more. He said a deficit fund should be established in the short term to allow people 10 years to pay off £1,000 on their bills.

But UK ministers have said they are sticking with the price cap.

“The energy price cap is the best safety net for millions, preventing suppliers from overcharging consumers,” the government said in a document released alongside the Queen’s Speech.

It added: “By extending the energy price cap beyond 2023, the Government will be protecting 22 million households who are on default tariffs.”

Ofgem have told MSPs that “robust enforcement action” will be taken if energy companies treat customers unfairly when increasing direct debit payments.

Ofgem chiefs told Holyrood’s Energy, Net Zero and Transport Committee that a “very invasive” review is under way into the way energy companies use direct debits.

It follows concerns raised by Martin Lewis’ Money Saving Expert website, which said at least 30% of customers with British Gas and Scottish Gas, Octopus Energy and Shell Energy had their direct debits increased by 100%.

Mr Lewis said the scale of the direct debit increases “smells wrong” – even when accounting for the recent increase of the energy price cap.

Scottish Labour MSP Monica Lennon asked Neil Lawrence, Ofgem’s director of retail about the issue, over reports some consumers had seen their bills double despite energy prices going up by 54%.

Mr Lawrence said he recognised times were currently “troubling” for consumers.

Market compliance reviews are currently under way across the industry, he said, which will look into direct debits and whether increases are fair.

Discussing fuel poverty, he said 613,000 households in Scotland were considered to be in this category and 311,000 in extreme fuel poverty.

Social justice secretary Shona Robison said the UK government had failed to tackle the cost of living crisis following the publication of the Queen’s Speech.

She said that bold, radical action was needed to protect people from inflationary pressures and rising energy bills and today was another missed opportunity.

 She said: “The cost of living crisis is impacting every household in the UK and there are families struggling right now but yet again, there is no help for them.

“We have repeatedly urged the UK Government to match our level of ambition and take urgent action to address the cost of living crisis and spiralling energy costs. Unfortunately, the Queen’s Speech was a missed opportunity, with a lack of details and clear commitments to provide adequate support to households facing hardship right now.

“The UK Government holds most of the powers required to tackle fuel price rises – both in the immediate and longer term – and the planned Energy Bill is long overdue. There has been little engagement with the Scottish Government on this legislation so we need more details of how it will help tackle the energy crisis.

“Meanwhile the Scottish Government will continue to do everything within our powers and fixed budgets to ensure our people, communities and businesses are supported as far as possible. We are investing almost £770 million per year in cost of living support, including through a range of family benefits not available elsewhere in the UK, doubling the Scottish Child Payment, mitigating the bedroom tax, and increasing Scottish benefits by 6%.

“People across the UK deserve to live safely and comfortably in warm homes, free from daily worries around food and fuel insecurity. The UK Government cannot stand by. They must take bold, radical action before people are forced into poverty.”