Stock in some of largest in Britain power companies have plummeted on Tuesday over concerned that government we will hit electricity producers and oil and gas companies with contingency tax.
The pressure is rising on ministers do more to help households offset the sharp increase cost of live as the UK regulator has warned domestic electricity bills are expected to jump more than 40 percent later year.
Stock in Drax, owner of largest in the UK power the station fell 16%, Centrica fell 10%, and SSE fell almost 9%. in London on On Tuesday, after the Financial Times reported that British Chancellor Rishi Sunak ordered officials to expand the scope of potential contingency tax.
Treasury had already considered introducing a tax on profit of North Sea producers, including BP and Shell, reported record profits thanks to high oil and gas prices. in in last year. But the officials also asked to consider extending the fee to other companies in energy supply chains as domestic electricity bills have skyrocketed.
Jonathan Brearley, chief executive of Ofgem, told MPs he expects price cap that limits amount overwhelming majority of British households pay for gas and electricity, up to rise 42 percent to around £2,800 per annum. year in October. price cap currently set twice a year but the regulator suggested switching to quarterly inspections.
Brearley told the House of Representatives of communities business choose a committee on tuesday that volatility in energy markets deteriorated after Russia invasion of Ukraine and what was not enough there sign of extended retreat in Prices.
“We expect price lid in October of £2,800,” Brearley told the committee, adding that he would later send a letter to Sunak. on Tuesday. ofgem has already lifted the annual price limit to £1971 in April. At the end of In 2020 it was £1,042.
Energy providers warn that 30 to 40 percent of households may run out up in fuel poverty in coming winter.
Analysts say the tax on electricity generators also hit several large foreign energy companies, including ScottishPower, a subsidiary of Spanish Ibedrola, French EDF Energy and German RWE.
Proposed broader contingency tax also include smaller producers who have benefited from an early subsidy scheme to encourage construction of low-carbon energy production, which are believed to have profited significantly from high wholesale sales power Prices.
But business secretary Kwasi Kwarteng distanced himself from looming windfall energy tax on Tuesday, telling the committee that he was very clear in his opposition to it, not least because it could be detrimental to UK efforts to hit it’s 2050 net zero purpose by discouraging producers from investing in renewable energy sources.
“We are asking generators to deploy record amounts of capital in build infrastructure that we need to hit in net zero goal, so I think it’s a tough proposition,” he said.
Kwarteng said that Sunak was also “instinctively against contingency taxes,” but did not deny that policy became more and more likely. “If a [Sunak] feels that these extraordinary times require emergency measures. up to him,” he said.
Energy Investec analyst Martin Young agreed with Kwarteng, saying ministers support contingency tax should be careful that [they] wish for”.
Oil and gas producers also criticized plans for collection. Linda Cook, Executive Director of Harbor Energy, the largest oil and gas producer in North Sea, declared at a conference in Aberdeen that additional taxes “would hurt the level of investment in the energy sector, our domestic energy security and ability to advance the country’s energy transition ambitions.”
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Sunak officials work on contingency tax model for North Sea oil and gas producers, similar one represented by then Chancellor George Osborne in 2011, according to those informed on in policy. Osborne increased the “additional fee” charged on oil and gas production and raised £2bn. The surcharge fell only on his original level when oil price returned to trigger price of $75 per barrel.
Executives privately resigned themselves to the possibility of contingency tax. “Perhaps we in situations where it is unavoidable,” he said. one.
Ben van Beurden, chief executive of Shell, told the company’s annual shareholder meeting that “good ways and bad ways of developing a tax structure, and if you do in a bad way it can discourage investment.” He said way the existing surcharge was designed would allow companies like Shell that invest in green projects to offset investment in renewable energy sources against expected fee.
Dan Alchin, director of regulation in Energy UK, said manufacturers have invested billions in help transform the country’s energy system and were “ready to provide billions more to help the country is achieving its climate change goals.”
“We need be careful of any action that could inadvertently jeopardize the path to energy security, net zero and reliable littlecost electricity, he said.
Additional report by Tom Wilson