Energy bailout? Scottish Power says not so fast
With households struggling to pay their energy bills in response to the coronavirus lockdown, suppliers are asking for an energy bailout to help them support their most vulnerable customers. Find out why some experts say this is a bad idea.
For up-to-date information regarding the development of the coronavirus (COVID-19) pandemic, consult official sources like the World Health Organization and the UK government.
Energy leader Scottish Power has advised against an energy bailout for UK gas and electricity providers as companies brace to take a financial hit in response to the coronavirus pandemic.
Energy UK, the trade body for UK energy suppliers, has asked the Department of Business, Energy and Industrial Strategy (BEIS) to create a loan scheme worth £100 million per month to help suppliers support customers struggling to pay their gas and electricity bills during this difficult time.
Since BEIS will likely want to know the precise financial impact of the coronavirus pandemic on each supplier before providing assistance, a response is not likely to happen anytime soon. However, the possibility of an energy bailout is already facing a backlash.
Why are executives against an energy bailout?
Keith Anderson, chief executive of Scottish Power, expressed concerns to the Financial Times about energy companies “screaming for a bailout” so early on in the coronavirus pandemic.
“We need to wait and see what is happening, wait and see what comes through the system, wait and see how customers react,” said Mr Anderson. “There’s been a few panic calls for action and immediate response . . . and I think we need to take our time and reflect,” he continued.
Mr Anderson pointed out that when comparing the energy sector to other industries that are suffering far worse, gas and electricity suppliers “should be at the back of the queue” for help.
The UK Government has already guaranteed a £330 billion loan package to help the nation’s businesses, including energy providers, survive during this crisis. So why do some energy suppliers think they should receive additional funding?
Octopus Energy chief executive Greg Jackson proposed that instead of the government bailing out energy companies, the money should go directly to consumers.
He expressed concern that if “government money goes to suppliers instead of directly to customers, those companies can choose what they want to do with it. Some will decide to help out customers, but some will spend it on other things.”
Good Energy CEO Juliet Davenport also expressed disapproval of an energy bailout. “There will be some businesses that were not doing well already and coronavirus is just giving them an opportunity to get some free cash. That’s probably a little bit harsh but I would say there would be some unscrupulous businesses out there definitely,” she told Utility Week.
It is important to keep in mind that these executives could be against an energy bailout because they see an opportunity for their companies to increase in market share. Companies that are financially weak may go bust without additional government support, thus consolidating the market and leaving thousands of customers to then be taken on by their own companies.