British Gas would donate 10% of its income during the “duration of the energy crisis” to help consumers cope with rising costs.
The money, according to the company’s owner Centrica, will be deposited into an existing support fund, thereby tripling the amount of winter assistance accessible to the lowest consumers.
The company, which has generated enormous profits this year, announced that thousands of homes will get handouts between £250 and £750.
However, this is only a fraction of the national aid required to combat the situation.
This week, one energy business executive estimated the cost to be closer to £100 billion.
British Gas’ offer of assistance will be based on the company’s first-half 2022 retail supply profits, which were £98 million before tax. The initial donation was stated to be $12 million.
However, Centrica, the parent company of British Gas, recorded adjusted operating profits of £1.3bn for the six months ending in June, up from £262m a year earlier. The majority of these earnings were generated by oil and gas drilling.
And according to Paul de Leeuw, director of the RGU Energy Transition Institute at Robert Gordon University in Aberdeen and a former Centrica executive, British Gas’s initial donation would only benefit 0.5 percent of its 7.5 million consumers.
He stated that while it was a kind gesture, the original £12 million donation represented only 1% of Centrica’s income.
“They have 7.5 million energy customers in the United Kingdom, so if you look at the available money, it will likely benefit little more than 40,000 people, or 0.5% of their customer base.
Therefore, 99.5% of Centrica and British Gas customers are unlikely to benefit from this.
On Friday, the latest energy price cap, which limits how much energy companies may charge per unit in England, Scotland, and Wales, will be announced.
The average annual residential energy bill is projected to reach £3,553 in October, up from the present level of $1,977, with further increases anticipated for January.
The government has offered a package of aid, but there have been cautions that without additional assistance, many people may face hardship.
Energy companies are also under pressure to assist, as their earnings have skyrocketed this year due to record high energy prices caused by Russia’s invasion of Ukraine.
According to insiders at British gas parent company Centrica, this offer is a call to arms for other corporations across all industries to do the same in times of national emergency.
According to sceptics, it is a symbolic gesture that represents a minuscule proportion of the entire cost of homes. This is made possible by the fact that the parent firm is earning enormous profits from its gas production business, which is not the case for other energy retailers.
Scottish Power estimates that protecting customers from rising wholesale energy costs will cost £100 billion. British Gas asserts that they are the first company to spend their own money on assisting suffering customers.
Others contend that it is a drop in a vast ocean of impending financial calamity.
The company, the largest energy supplier in the United Kingdom, stated it would continue to donate approximately 10% of its supply revenues every six months “for the duration of the energy crisis, retroactive to the beginning of 2022”
Mr. de Leeuw stated that Centrica had made a “wise step” that “anticipates a discussion about a potential windfall tax on energy providers” and that other corporations could adopt similar actions.
However, he stated, “This requires billions to correct, not millions, therefore we are having the wrong discourse if you wish to resolve the imminent energy crisis.”
Chris O’Shea, CEO of Centrica, stated that the support package was worth £25 million. “As a responsible company, we want to do more to assist our clients during this challenging period,” he said.
This week, rival power company Scottish Power suggested a two-year industry-wide freeze on energy bills.
The government would cover the difference between what individuals pay for the energy and how much it costs to power their homes, according to the £100 billion plan, according to the scheme’s executive, Keith Anderson.
The expenditure may then be reimbursed over the subsequent 15 to 20 years, with the UK government covering the expense.
Mr. Anderson reported that he had presented the concept to Business Secretary Kwasi Kwarteng, who was “seriously examining” it.
Up until now, the government has promised a £15 billion package of aid for British households. This includes a one-time payment of £650 for eight million low-income households and a grant of £400 for every home.
In the coming weeks, National Grid will also announce plans to offer reductions on electricity bills to customers that reduce consumption during peak hours.
Before the 5th of September, No. 10 stated that no fresh support would be granted until a new prime minister is installed.
Liz Truss, the current frontrunner to replace Boris Johnson, has promised tax cuts and lately hinted at direct financial assistance for struggling households.
Her opponent, Rishi Sunak, has stated that he will introduce more targeted support for homes and eliminate VAT on domestic energy bills.
But Resolution Foundation, a research tank, warned that the United Kingdom would face a “catastrophe” if the government did not protect the neediest this winter.
It proposes a 30% bill reduction for assistance recipients and homes where all members earn less than £25,000 annually. It was also stated that freezes on energy bills, social tariffs, and a 1% “solidarity tax” on all income tax rates would alleviate the issue.
The British Chambers of Commerce seeks extra assistance for small firms to deal with rising energy prices.
It desires a grant for businesses and a temporary reversal of National Insurance contributions to “put money back in the pockets of firms and workers.”
