British gas owner Centrica and Octopus Energy are understood to be backing a plan that would create a multibillion-pound facility to spread the cost of an emergency funding package over a decade, the Guardian can reveal. Partner suppliers ScottishPower and Eon have presented plans to ministers for the ‘tariff deficit fund’ backed by a government guarantee. Under the proposals, first reported by the Sunday Times, commercial banks would put cash into the Treasury, which suppliers could then draw on to fund measures to freeze customers’ default tariff accounts in the current price cap, £1,971, two years. The cost of the scheme will then be paid back over 10 to 15 years through a charge on bills or through taxation. Centrica chief executive Chris O’Shea is understood to have voiced his support for the idea at a meeting between ministers and energy chiefs on Thursday last week. Sources said several solutions to raise funds to tackle the bills were presented by companies to Boris Johnson, as well as the chancellor, Nadim Zahawi, and the business secretary, Kwasi Kwarteng, at the meeting. They would either double the existing package announced by former chancellor Rishi Sunak, which will cut £400 from every household’s bill, or use government or private sector funds to freeze the price cap, creating the deficit system. part of this selection. Octopus chief executive Greg Jackson told the Guardian that “urgent action” was needed and that the tariff deficit fund was among the options the government should consider. He said: “Because of the war in Ukraine, the UK has to pay £51 billion extra for its gas – the equivalent of 9p on the basic rate of income tax. Subscribe to Business Today Get ready for the business day – we’ll point you to all the business news and analysis you need every morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. “Urgent action is needed to help people get through this winter, whether that’s doubling the existing government support scheme, freezing the price cap or private sector initiative like the tariff deficit proposal. “And we need a concerted effort to reduce the problem by next winter through more efficiency, renewables, gas storage and market reform.” A Centrica spokesman declined to comment on discussions with the government, but said: “It is clear that significant intervention is required to protect customers. There are many ideas being discussed, but each one needs to be carefully evaluated to ensure it is in the long-term best interests of the client and to avoid any unintended consequences.” The approval of two suppliers with more than 10 million customers combined adds significant weight to the concentration dynamics behind the deficit plan. The initiative echoes similar financial support introduced during the pandemic, when the government backed emergency loans for companies. It is understood that Barclays and NatWest discussed previous plans to introduce a similar scheme earlier this year. ScottishPower chief executive Keith Anderson proposed a plan along similar lines in the spring, but Sunak opted instead to use a windfall tax on North Sea oil and gas operators to fund part of his £15bn support package . Labor leader Keir Starmer has proposed a boosted windfall tax as part of a £29bn plan to stop people paying “a penny more” on their fuel bills this winter. Industry figures said the Conservatives – currently mired in a leadership row between Sunak and Liz Truss – needed to act quickly to ensure any support measures were introduced before the higher bills kick in this autumn. Energy regulator Ofgem is due to announce the level of the price cap on August 26. The new cap, estimated at £3,582, will then be introduced on 1 October. “This gives us 35 days to send price change notices to customers and apply the new limit to our system. The longer the government lets it go, the more confusion there will be. The carnage can be extreme,” said the managing director of one supplier.
