Negative wind subsidies help cash-strapped UK energy suppliers
The Contract for Difference mechanism is easing the big squeeze on retailers
The UK government is facing a political crisis over soaring energy bills. The next increase in the retail price cap in April promises to be brutal: average household bills will rise by around 50% to £2,000 per year, and could hit £2,300 in October. Ministers are scrambling for ways to square the circle of alleviating suppliers’ ballooning wholesale costs without heaping too much pain on hard-up consumers. Is the answer to their problems blowing in the wind?
Moves are afoot for the Treasury, or more likely lenders, to underwrite UK energy retail sector losses — which are estimated at £20 billion and rising. Even with government intervention, regulator Ofgem will have little choice but to pass some costs through to utility bills come April. Its priority is to stop more suppliers from going bust. This will add fuel to the fire of the cost-of-living crisis that threatens to dominate the UK political agenda in 2022.
In the meantime, some power generators, energy producers and traders are mak…