Millions more of EON’s customers will fall into fuel poverty this winter, if the government doesn’t step in to provide more help to struggling households, warned the energy giant’s boss Michael Lewis.
The chief executive told the BBC a staggering 40 per cent could be facing fuel poverty when the price cap is expected to be hiked again in October, with 1.6m customers already struggling to heat their homes.
As it stands, a household is considered to be in fuel poverty if it has to spend 10 per cent or more of its disposable income on energy.
He also revealed one third of its customers are now slashing spending on food, with inflation rising to a forty-year high of nine per cent.
Lewis said: “We are seeing a significant number of people in fuel poverty – that’s to say more than 10 per cent of their disposable income spent on energy – and that’s risen to 20 per cent. And in October, our model suggests that could rise to 40 per cent if the government doesn’t intervene in some way.”
EON is home to eight million customers and is one of the country’s big six energy suppliers, making profits of £6.6bn last year, but Lewis argued the scale of the crisis is “too big for us to manage at the moment.”
Lewis has called on Downing Street to provide immediate financial packages of support for households to ease cost of living pressures.
While the energy boss argued that the “broadest shoulders” should bear the burden, he said it was less important how the government stepped in, just that they did.
He said: “The most important thing is that the government intervenes – it is up to the government to decide how they fund that.”
“We do need more intervention in October and it has to be very substantial.”
Today’s media appearance follows Lewis’ comments to the Business, Energy and Industrial Strategy Committee last month, when he called for the government to consider placing environmental levies into general taxation.
Alongside shifting green fees, he suggested the government should consider cutting VAT to zero and extending the Warm Home Discount – which currently provides a £140 annual saving to 3m households.
Price cap could rise to £3,000 per year
Commenting on the price cap, Lewis revealed that household bills could rise as high as £3,000 per year in October, compared to just £1,277 per year 12 months prior.
This is above the latest forecasts from energy specialist Cornwall Insight that the price cap could rise to £2,600 per year this autumn, with markets increasingly volatile.
He said: “In my 30 years in the energy industry I’ve ever never seen prices increasing at this rate.”
Last month the price cap spiked to nearly £2,000 per year, an eye-watering 54 per cent rise, adding around £700 to annual energy bills.
For the 4.5m people on pre-payment metres, primarily used by people on lower incomes, prices have risen to £2,017 per year.
The increase was sanctioned by market regulator Ofgem to ensure prices reflected market conditions, with wholesale prices soaring to record levels earlier this year following Russia’s invasion of Ukraine.
Conflict in Eastern Europe exacerbated already elevated prices with rebounding post-lockdown demand and supply shortages driving up prices.
This has driven market carnage which has seen 29 suppliers exit the market, directly affecting over four million customers, which were unable to deal with the lethal combination of spiked natural gas prices and the constraints of the price cap.
It has also added heavy clean-up costs to consumer bills, with Bulb Energy’s collapse into de-facto nationalisation costing the taxpayer a hefty £3bn, the biggest state bailout since RBS in 2008.
The onboarding costs for surviving suppliers taking on stranded customers from fallen firms has also risen to £1.8bn.
Lewis refused to comment on the viability of a price cap on North Sea oil and gas companies, with BP and Shell posting record profits of £5bn and £7bn respectively during the first three months of the year, powered by soaring oil and gas prices.