According to the CEO of the corporation that owns British Gas, energy prices will likely remain high for the foreseeable future.
Chris O'Shea, the chief executive officer of Centrica, believes the worst of the energy crisis has passed, but risks persist. This weekend, a new price limit goes into effect, and households with typical energy consumption will pay $2,074 per year.
Mr. O'Shea stated that prices have decreased in response to the conflict in Russia, but remain above the long-term average. He believed that the initial phase of the crisis had concluded. "I believe it is important to recall that energy prices had more than doubled prior to Russia's invasion of Ukraine.
Gas and electricity bills will drop below the £2,500 threshold that was subsidized by the government as part of its Energy Price Guarantee program. However, under the new price limit imposed by Ofgem, household bills will remain £800 higher than they were two years ago.
In the meantime, Cornwall Insight, a consulting firm, predicts that adjustments to the price cap - which limits how much companies can charge per unit of gas and electricity - will increase energy bills for the average consumer to £1,871 per year beginning in October. This is expected to increase to $1,900 in January.
Mr. O'Shea was speaking with sources as Centrica announced that it would double the quantity of gas stored in its Rough storage facility off the coast of Yorkshire in preparation for the upcoming winter. Despite the additional storage, there was a risk that the United Kingdom would become complacent about the resilience of its energy supplies, which were still susceptible to external disruptions.
He stated that there is a risk of complacency because last winter went well and prices are currently quite constant. Currently, economic activity in China is relatively minimal. If this begins to increase, there will be a greater demand for gas in the form of LNG [Liquified Natural Gas], which will lead to an increase in European gas prices and the potential for future volatility.
The United Kingdom has among the lowest gas storage capacities in Europe. The Rough storage facility, located 18 miles off the coast of Yorkshire, was effectively decommissioned in 2016 due to new gas and electricity connections to Europe.
In October 2012, it was partially reactivated with three days' worth of the average UK gas consumption poured in. This will be increased to six days on Friday, bringing the UK's total reserves to 12 days.
Mr. O'Shea stated that there is insufficient gas storage; it could be more resilient. However, it's much improved than it was. Therefore, we have doubled the capacity, and we should not lose sight of the fact that this makes a tremendous difference. In contrast, Germany has 90 days of gas reserves, France has 103 days, and the Netherlands have 123 days.
Centrica stated that it would like to see Rough's capacity increased to 27 days, but this would require a $2 billion investment and, according to Mr. O'Shea, a government subsidy via a special pricing structure. In anticipation of winter, the CEO of Centrica acknowledged that many customers would struggle to pay their energy bills in light of escalating food and housing costs.
British Gas came under fire earlier this year when The Times newspaper reported that a company contractor was installing prepayment meters in the homes of vulnerable customers. Force-fitting prepayment meters was temporarily halted across the industry.
They can now be reinstalled, but Ofgem has stated that customers must be given more time to clear arrears, and forced meter installations are prohibited in residences where all residents are over 85 years old.
Ofgem is conducting a current investigation into Centrica. The company has brought its debt collection in-house, but Mr. O'Shea says it is still difficult to distinguish between those who refuse to pay and those who sincerely cannot. He suggested introducing a social tariff for the most indigent consumers, funded by general taxes.
The government support implemented with the energy price guarantee was extremely beneficial to individuals, but it was not targeted, he said. Therefore, it benefited the wealthiest members of society as much as it helped the poorest.