The UK government is planning to impose a one-off levy of £17 on energy bills next year to help suppliers cope with rising debts, which have reached £2.6bn in the summer.
The levy, which would not take effect until April 2023, is designed to protect consumers from extra costs during the winter, when energy demand and prices are higher.
The energy regulator, Ofgem, said the levy was necessary to maintain a stable energy market and protect consumers from higher costs and poorer service if suppliers fail.
Ofgem will consult with the industry, consumer groups and the public on the options, including how to spread out the levy over time or across different customer groups.
The move comes as the chancellor, Jeremy Hunt, is under pressure to extend the energy price guarantee, which limits the annual household bill to £2,500, until the end of March.
Hunt had planned to reduce the support from April, raising the cap to £3,000 and ending the one-off support of £400 that was available over the winter.
Campaigners have warned that the price increase would plunge many thousands more families into poverty, especially amid the ongoing Covid-19 pandemic and the rising cost of living.
Energy suppliers have been contacted by government officials with two sets of rates for units of gas and electricity, depending on Hunt’s decision.
The government has not confirmed the U-turn, but sources said Hunt would keep the cap at £2,500 for another three months, until July.
The wholesale energy market is expecting prices to fall to more affordable levels over the summer, as supply and demand balance out.
Suppliers are supposed to give customers a month’s notice before changing their tariff, but the regulator has given them some leeway on the dates, to avoid confusion and disruption.
Pressure has been mounting on Hunt to reverse the planned cut to support since wholesale gas prices began falling sharply earlier this year, due to increased production and lower demand.
However, Russia’s decision to stop supplying gas to Europe in October pushed up bills, forcing the UK government to intervene and provide emergency loans to suppliers.
A U-turn by Hunt would bring the government bill for the energy price guarantee to £29.4bn, but the government has already made a saving due to the falling gas and electricity prices.
The government said the levy and the price guarantee were temporary measures to help the energy sector and consumers through a difficult period, and that it was committed to a green and fair energy transition in the long term.
