Energy companies are being squeezed by rising gas prices that will be passed onto customers in April.
The boss of the UK’s biggest energy supplier has said it does not want a bailout from the Government as households prepare for a 50% spike in their bills.
“There are reports that some energy companies want a £20 billion handout to keep household bills down,” he wrote in an opinion piece published in the Sun on Friday.
“Not British Gas.
“We haven’t asked for a bailout, we don’t want a bailout, and we oppose any bailouts.”
Energy bills are set to go up significantly in April. Households will not know exactly how much their bills will rise until next month, but some experts are predicting a hike by around 50%.
This means that an average household on a supplier’s default tariff will pay nearly £2,000 per year for their gas and electricity, compared to less than £1,300 today.
Supporters of the potential £20 billion package say it would insulate customers from such a big shock.
The price hike is due to soaring global gas prices which mean that energy suppliers have to buy their gas at much higher levels than before.
“Energy suppliers have to pass on higher wholesale costs to survive,” Mr O’Shea wrote.
He said that if the Government chose to suspend VAT on energy bills, households could save around £100 per year.
However this will only offset a small proportion of the expected £700 hike in energy bills, and critics say it is a blunt tool that will help both rich and poor households.
It will deprive the Government of nearly £2 billion that it could otherwise use to help households most in need, some argue.
Mr O’Shea said that another option would be to remove social and green levies from energy bills and instead have the taxpayer pay for the programmes. This could save customers £170, he said.
Jess Ralston, an analyst at the Energy and Climate Intelligence Unit, argued that it makes little sense to slash green levies, when it is the price of gas, a fossil fuel, which is pushing up bills.
“The talk of slashing levies ignores the fact that a significant proportion goes to insulate fuel poor homes and help the elderly cover winter heating bills,” she said.
“Without a decade of these levies many poorer households would be facing a much more frightening prospect.
“Electricity bills aren’t rising as sharply as gas because early renewable subsidies are paying off, with cheaper wind and solar power cushioning the current high running costs of gas power stations.”