Our new Prime Minister is facing a national crisis.
It's going to be an absolutely catastrophic winter
unless the government steps in.
What will Liz Truss do about soaring energy bills?
How can you justify such a massive hike?
How can you justify £8,000?
It's ridiculous.
Tonight we investigate companies cashing in.
The biggest winners in these crises are the oil and gas producers.
No question about that.
And the extraordinary profits being made.
This is a moment of real crisis, I think,
where we can no longer justify letting them get away with that.
While vulnerable families are pushed to the brink...
They're raising their prices and they just
don't understand that for us electricity is the difference
between life and death.
It
It is
It is an
It is an essential
It is an essential need
It is an essential need for
It is an essential need for our
family
It is an essential need for our family and
It is an essential need for our family and our
It is an essential need for our family and our child.
One, two, three four five...
Lauren lives in Birmingham with her partner Sam
and their two-year-old son Arlo.
She's a primary school teacher, and he's an illustrator.
They take home just above the average household income of £31,000.
But that's no longer enough.
Petrol has gone up a lot.
We are spending a lot more to get and from work now.
Nursery fees have gone up.
Our rent has gone up.
And our gas and electric has gone up probably the most, hasn't it?
Yes.
So, a year ago we were paying about £100 a month,
and now it is £250 a month for our gas and electric.
So, it's really hiked up.
It's at the point now where we feel like we are kind
of scraping at the barrel - we are being as sensible as we can.
But it is just getting tighter and tighter.
Heart-breaking, isn't it?
We work every day and then at the end
of the month it all disappears.
UK gas and electricity prices have already doubled in the past year.
They're expected to rise to more than £5,000 a year in January.
Could you afford that?
I don't think we will be able to.
No.
We are already at our limit with the energy bill
at the minute and we can't afford any more.
And to think about it going up again,
you just feel really helpless.
The UK is the hardest-hit country in western Europe.
More than half of households are expected
to be pushed into fuel poverty.
I think we're entering into a real national emergency now.
We've already seen around seven million people not able
to afford all the essentials, so people who are having
to skip meals, not be able to have showers,
afford toiletries, can't heat their homes properly.
It's going to be an absolutely catastrophic winter
unless the government steps in.
The crisis started with increased demand for energy
as the world came out of lockdown.
Then Russia invaded Ukraine, and the gas price spiralled further.
Prices had already increased before the war.
And then when Russia invaded Ukraine in February 2022,
prices went up even more.
So it's an unprecedented sequence of events that starts from Covid
and ends with the war in Ukraine.
The impact of soaring gas and electricity prices
will be felt by every one of us.
This year, UK households are expected to pay over
£100 billion more for their energy than they did last year.
It's an incredible sum of money.
So where's all that extra cash going?
Unlike much of Europe, the UK isn't dependent on Russian gas.
Our biggest foreign supplier is Norway.
We paid the Norwegians an extra £8 billion
in the first six months of this year.
And the cost of gas has soared since then.
Norway's state-owned energy company tweeted its financial results
with emojis of bags of cash.
The Norwegians are already the equivalent of the Saudi Arabian
oil sheikhs, wearing jeans.
In simple terms,
Norway provides somewhere in the region of 25% to 30% of our gas.
And the wholesale price of that gas has gone up five times
from its average level.
So simple arithmetic says that, that, er, the Norwegians
are making five times as much revenue from,
GB consumers as they might have been two or three years ago.
British oil and gas companies are cashing in too.
But they're not owned by the state.
So shareholders, including pension funds, are getting big payouts.
Between April and June this year, BP made nearly £7 billion in profit.
Its rival, Shell, did even better with a profit of £9.4 billion
in just three months.
That's more than a £100 million a day.
The biggest winners in these crises are the oil and gas producers.
No question about that.
Any big energy price crisis results in a massive transfer
from the consumers to the producers of those fossil fuels.
By and large you are talking about the big companies getting
a lot richer on the back of people who have to pay for
the energy they need.
And it's kind of as simple as that at one level.
Over the past year, BP has returned almost £10 billion to shareholders
in dividends and share buy-backs.
Its boss has described the company as a cash machine.
Today we have high oil prices the company as a cash machine.
and a few things happen when the price of oil is high.
Number one, we do make more profits, as you have seen this morning -
that we can use to reward our shareholders.
And Shell has returned £15 billion to shareholders in the last year.
On the back of robust operational performance,
our strategy is delivering for our shareholders.
Both Shell and BP say they will be providing financial support
for people struggling this winter.
And that they are investing billions in the UK
to deliver lower carbon energy.
But the crisis in the energy market has delivered a windfall
for the energy producers.
BP and Shell have operations all over the world but some
of their huge profits come from oil and gas here in the North Sea.
The North Sea still provides half of the UK's gas.
Much of it comes ashore here
at Shell's Bacton gas plant in Norfolk.
So what happens down here?
There's eight pipelines going into Bacton from the gas rigs
in the North Sea. Um, it's a 24-hour operation.
It's a major employer around this area, as well.
They take the gas in there and then pipe it off
to other places.
In May, the government announced a windfall tax -
an additional 25% on profits from North sea oil and gas.
It is possible to both tax extraordinary profits fairly
and incentivise investment.
So we will introduce a temporary targeted energy profits levy.
The government says the new tax will increase investment and raise
£5 billion over the next year.
But critics say the tax isn't all it seems.
Dan Neidle is a Labour-supporting lawyer.
He used to be head of tax at one of the City's biggest legal firms.
So, this tax, it's often called a windfall tax.
It's not strictly a windfall tax because it's not retrospective.
It's a tax that applies going forward.
So most of the massive profits applies going forward.
from the six months of this year aren't touched.
Correct.
The windfall tax also has an investment allowance
which is intended to encourage investment.
The problem is the time horizon of the windfall tax is so limited,
it's very unlikely it will encourage any investment.
So all the investment allowance is doing is throwing money away.
It's a dead weight cost and we can estimate reasonably conservatively
that the minimum cost of that is £3.2 billion.
It is impossible to justify oil and gas companies
making massive profits, while households
all across the country are looking at energy bills that they can't
afford, so, there is clearly a need to help offset some of that
real suffering and frankly, despair, that families are going to be
pushed into as a result of exactly the same dynamics that are causing
unexpected and indeed record profits for the oil and gas industry.
Customers don't buy gas and electricity
from the likes of BP and Shell.
They pay energy suppliers who have bought it on the open market.
Some suppliers have been accused of cashing in too.
It's quite a lot, isn't it?
They are saying there that prices are going to rise by 12%.
In south Wales, Liz Bergelin and her husband Pete use British Gas.
She's a childminder and he's a lecturer.
It
It is
It is going
It is going to
It is going to be
It is going to be a
It is going to be a tough
It is going to be a tough time.
They earn around the average household income.
And they're worried about their energy bill.
Every month you are looking, are we going to have enough money
to pay all the bills at the end of the day and keep
a roof over our heads?
And if it increases by £100, £200,
then where are we going to find those extra pounds?
It's a lot.
So what are you going to do if you can't find the extra?
I really don't know how we are going to manage,
to be fair.
It's going to be a difficult time, definitely.
Liz would like to find a fixed-rate energy deal
to protect her against further price rises.
So this came through at the beginning of August.
But she says the deals on offer from energy suppliers
are far too expensive.
So I had an email from British Gas which basically gave me
the reassurance of being able to come into a fixed rate tariff.
So this is what we are paying, about £3,000,
so which is about £250 a month, about £3,000,
But I could be reassured
and fix my prices in for just over £8000 a year.
That's astronomical!
What did you think when you opened that?
I was really angry.
How can you justify such a massive hike in your fixed rate tariff?
How can you justify £8,000?
It's ridiculous.
Centrica, the company that owns British Gas,
says fixed rate offers are "based on projections
as to where prices will go".
It says it will use 10% of British Gas profits
to "help customers who need it the most".
And that it's "making long-term investments
"to support the UK's energy security and resilience".
There is a limit on the amount energy suppliers in Great Britain
can charge customers.
The regulator Ofgem sets a maximum price for each unit
of gas and electricity.
But the price cap keeps going up.
Ofgem says it has to allow energy suppliers to put up their bills
in line with the rising cost of gas.
If it doesn't raise the price cap, suppliers will go bust.
29 of them have already gone under since the crisis started.
But one of Ofgem's directors has resigned in protest.
This is her first interview.
The Ofgem board has to weigh up a number of competing desirable
things when it takes decisions on the price cap.
One is keeping the market reasonably stable, but another one
is obviously protecting the interests of consumers.
My view was that the top priority to protect consumers this winter
was to keep bills as low as possible and that's not the decision
that the board took.
The board took the decision to actually allow suppliers to claw
back more funds on bills, to get them through this
very difficult period.
I couldn't agree with that.
Is the price cap fit for purpose?
The price cap was invented to deal
with yesterday's problem, and it really isn't fit for dealing
with today's problem, which is extremely high and volatile
energy prices, because it can't reduce the wholesale price.
It's only dealing with the retail bit of the market.
So I think now we need a completely different set
of solutions in order to protect consumers and, in my view,
only government can actually provide those solutions.
Ofgem says it's working with the Government and industry
to find solutions, and is doing everything possible
to protect customers.
Ten days ago, another rise in the price cap was announced.
Millions of households in England, Scotland and Wales will see
their energy bills soar by 80% after the regulator...
Shocking.
..raised its price cap.
Liz is still on a variable rate, so her bills are going up again.
Now in October, that will jump to £3549 a year.
It will be bigger than our mortgage.
We will maybe able to have support from other family members, you know,
but at the same time, you don't want to be doing that -
calling on people in your family to help pay your
regular household bills.
That just doesn't sit well at all.
It's not what people should be doing.
They shouldn't be looking to get a loan to pay their energy bills.
It's just not...it's not right.
It's not just the price of gas that's spiralling -
the price of electricity increased five-fold in a year,
from £80 a megawatt hour to around £400.
The steep rise in electricity prices makes sense
if it's powered by expensive gas.
But more than half the UK's electricity comes from
other power sources, like nuclear or renewables.
So why's that gone up too?
This graph shows what's going on.
It doesn't matter how electricity is produced.
It always tracks the price of gas.
I think what many people find surprising is that the 40%
of our electricity that we get from gas sets the price
on the whole electricity market.
So when the price of gas goes up, the price of
electricity goes up too.
And because the price of gas has gone up five times or so,
the price of electricity has gone up by a similar amount.
It means companies that make electricity without using gas
can make a killing.
This is Sizewell B, in Suffolk.
15% of the UK's electricity comes from nuclear plants like this one.
The cost of generating electricity from nuclear power
isn't really going up.
But the market price for electricity has skyrocketing.
It means a windfall for the nuclear industry.
EDF - the French company that owns our nuclear power stations -
hasn't made a big profit yet.
It's locked into long-term sales contracts at much lower prices.
But as these contracts end, EDF will be able to sell electricity
for far more than it costs to make.
You can see the profits to be made by looking
at EDF's business partner, Centrica.
It's also selling some of that nuclear electricity.
And the price it's charging has already doubled in the past year.
It's helped Centrica's overall profits rise five-fold
over the same period.
Both companies say nuclear is a long-term investment and that
profits should not be assessed on a short-term basis.
The nuclear industry is doing very well at the moment.
We don't know from exactly what contracts they've entered into.
We would certainly expect that the nuclear generators
are making much higher profits than they would do normally.
It's really as simple as that.
It's a similar story with wind farms.
Modern wind farms can make a megawatt hour
of electricity for less than £50.
But you can currently sell that megawatt hour for many times
that price on the open market,
so there are extraordinary profits to be made.
The Government says it's looking at ways to "decouple" electricity
prices from the price of gas.
But there's no quick fix,
even though we're all paying so much.
We've made some estimates of how much the revenues in the electricity
sector have increased.
Roughly, we find the revenues going to wholesale generators
went up from about 14, £14.5 billion in 2019,
to 30 billion by 2021, and our estimate is that
will close to double again.
Almost certainly this year over £50 billion.
Now, some of that is taken up genuinely by the increased cost
of running gas plants.
But I think it is quite clear that if the electricity system reflected
the average cost of making the stuff, it would save consumers
at least 10 billion a year.
Some wind farms aren't just profiting from sky-high prices -
they're getting hand-outs on top.
The Government brought in the subsidies 20 years ago
to encourage green energy.
They add another £6 billion a year to our electricity bills.
For those renewable generators that got into the early
subsidy system, they got two income streams.
They're selling into the wholesale market, but they've also got
the contract that guarantees them a subsidy on top of that from every
unit of renewable energy they sell.
So, yeah, those renewable generators are doing extremely well now.
One company doing particularly well is Greencoat UK Wind.
It has stakes in 38 wind farms that get the green subsidy,
like this one in South Wales.
Greencoat can now get about four times as much for its electricity
as it did a year ago.
That's a huge windfall profit, and the company still gets
the subsidies from our energy bills on top of that.
Greencoat stands to get millions of pounds in subsidies this year,
while the company's profits more than quadrupled to £550 million.
Greencoat says it "pays a fixed dividend" to shareholders
and all remaining cash is "reinvested into further
renewables capacity in the UK".
The company says it has "invested over £4.5 billion and plays
a crucial role in the UK's long-term energy security and
low-carbon transition".
It's the most vulnerable families who are paying the price
of the UK's energy crisis.
How are you doing?
You're relaxing, are you?
Dan cares for his nine year-old daughter, Elisa, in Bournemouth.
She has a severe form of cerebral palsy.
Good girl.
Um, so Elisa has various medication throughout the day.
So, she has them all directly into her stomach using a button.
Is that nice?
The machines that keep her alive all use electricity.
And the family's bill has trebled in a year.
So we can afford to pay for the bills that keep Elisa alive,
which about works - if the bill stays like
this - it about works.
But not for long, especially if there's going to be
another price hike.
We can't shave off anything any more,
so I don't know what we are going to do then.
Our dependency is total.
We can't shave off anything from what we need for Elisa.
So let's say we can't afford to feed her through the feed pump -
she would starve.
That's the only way to feed her, through the button.
So all of this equipment, they are a lifeline for her -
they literally keep her alive.
We need them.
So I might have to put some oxygen on in a moment
cos her saturation levels are dipping a little bit.
It's probably because she's starting to fall asleep.
They're raising their prices and they just don't understand that
for us, electricity is the difference between life and death.
If prices keep rising, they may not be able to afford
to care for Elisa at home.
I'm worried, if there is going to be another price hike,
I am worried that we can't keep Elisa home.
That...
Because we need to look at - as much as we would love
to have her home - we need to look at where she is the safest,
and if we can't afford our bills then she would be safest
in a hospital where the equipment is there, that she needs.
I don't - we don't want that to happen but
if there is no other option, then that might happen.
The Government says its "£37 billion package of help" will see most
people receive a "£400 discount on their energy bills",
and that "one in four UK households will see £1200 extra support".
It says ministers are discussing ways to "ensure markets function
effectively for consumers".
Britain's new Prime Minister has promised tax cuts and a plan
within the next week to deal with soaring energy costs.
But Liz Truss has ruled out further windfall taxes
on the energy companies.
And how do you feel when you hear the news,
that these energy producers are making eye-watering profits?
It makes you so angry.
What's their profit going to be in the winter when they hike up
all of our prices and we can't afford our energy bill any more?
It's just disgusting.
The energy companies say they're concerned about customers
and have put forward plans to ease the crisis.
But the profits of some companies look set to rise still further.
I think it's quite obscene for energy companies to be
posting profits in the billions when we are struggling
to actually pay their bills.
And I think energy companies are isolated from the reality
of a family like ours.