Shares in some of the UK’s major electricity companies fell sharply on Tuesday over fears the government would hurt electricity generators as well as oil and gas companies with excessive taxes.
Pressure is mounting on ministers to do more to help households offset the rising cost of living, as UK regulators have warned that local energy bills are expected to skyrocket by more than 40% later this year.
Shares of Drax, the owner of the UK’s largest power plant, fell 16%, Centrica fell 10% and SSE fell Tuesday by almost 9% in London after Revealed Financial Times That British Chancellor Rishi Sonak has ordered officials to expand the scope of potential tax.
The Treasury has already examined the imposition of a levy on the profits of North Sea producers, including BP and Shell, which have reported lagging profits due to high oil and gas prices in the past year. But officials were also asked to consider extending the levy to other companies in the energy supply chain as local energy bills soared.
Jonathan Brirley, CEO of UpJam, told MPs that he expects the price ceiling, which limits the amount most British households pay for gas and electricity, to rise by 42% to about £ 2,800 a year in October. The price ceiling is currently set Twice a year but the regulator does proposed Switch to quarterly reviews.
Barley told the House of Representatives’ select committee on Tuesday that volatility in energy markets has worsened since Russia’s invasion of Ukraine and that there is no small sign of a continued decline in prices.
“We are expecting a price cap of £ 2,800 in October,” Barley told the commission, adding that he would send a letter to Sonak later on Tuesday. Ofgem has already raised its annual price cap to £ 1,971 in April. At the end of 2020 it stood at 1,042 pounds.
Energy suppliers have warned this 30 to 40 percent of households May end in fuel poverty this coming winter.
Analysts said the levy on electricity generators would also hurt a number of large foreign-owned energy companies, including ScottishPower, a subsidiary of Spanish Ibedrola, French EDF Energy and German RWE.
The broader proposed tax would also include smaller generators that benefited from an early subsidy program to encourage the establishment of low-carbon energy production, which they believe benefited nicely from high wholesale electricity prices.
But Business Secretary Kwasi Quarteng shied away from approaching energy latitude taxes on Tuesday, telling the commission he was very clear in his opposition to the excessive tax, not least because it could hurt Britain’s efforts to achieve its 2050 net zero target by deterring generators from investing in renewable energy.
“We are asking the generators to deploy record amounts of capital to build the infrastructure we need to reach the net zero target so I think this is a challenging proposal,” he said.
Quartang said Sonak also “instinctively opposes width taxes,” but did not deny that the policy is becoming increasingly plausible. “If [Sunak] Feels that these extraordinary times require extraordinary steps, it depends on him, “he said.
Investec energy analyst Martin Young agreed with Quarteng, saying that pro-tax ministers should be careful what [they] wish for”.
Oil and gas producers have also criticized levy plans. Linda Cook, CEO of Harbor Energy, the largest North Sea oil and gas producer, told a conference in Aberdeen that additional taxes “would hurt investment levels in the energy sector, our home energy security and our sector’s ability to pursue state ambitions for energy transition.”
However, executives in the North Sea oil and gas sector are privately resigning over the likelihood of an excessive tax. “We’re probably in a situation where it’s inevitable,” one said.
Sunak officials are working on a tax model of a windfall for North Sea oil and gas producers similar to that introduced by then-Chancellor George Osborne in 2011, according to those briefed on the policy. Osborne increased the “supplementary charge” imposed on oil and gas production and raised £ 2 billion. The additional charge dropped to its original level only when the price of oil returned to a trigger price of $ 75 a barrel.
Dan Elchin, director of regulation at Energy UK, said the generators had invested billions to help change the country’s energy system, and were “willing to provide billions more to help the country reach its climate change goals”.
“We must beware of any action that could inadvertently jeopardize the path to secure energy, zero net and reliable electricity at low cost,” he said.
Shares in UK power companies slide over fears of windfall tax Source link Shares in UK power companies slide over fears of windfall tax