Treasury officials quietly introduced a new “super tax” to deter owners of energy companies from cashing in on lucrative contracts for pre-purchased gas before dropping their supply business.
The government quickly pushed through the new laws late last week to counter industry concerns that Stephen Fitzpatrick, the founder of Ovo Energy, could use his nearly two-thirds stake in the company to liquidate its long-term gas contracts and exit the supply market at a big profit.
Energy industry sources believe this loophole may have already been used by BP, which owned almost a quarter of Pure Planet before ending the challenger brand last October. He would have sold the energy he had bought in advance, using the profits to repay loans to BP.
Under the government’s new super-levy, called the Public Interest Company Protection Tax, a 75% tax will be imposed on any future windfalls an energy company shareholder might hope to make by cashing in on gas while leaving millions of people without a supplier.
Many suppliers who went bankrupt did not have long-term energy contracts, called hedges, in place. However, those who bought gas ahead of time, before markets hit record highs last year, found the value of the contracts had skyrocketed.
Ovo Energy said the new levy had its support and that it had been “clear for some time that action was needed” to help protect households and taxpayers.
The Guardian understands the tax was introduced to block any financial incentive for owners of energy companies to make their fortunes through the loophole, and to provide a ‘safety net’ for household bill payers and the public purse who should otherwise bail out customers. left behind.
Consumers in England, Scotland and Wales could already be owed a total of £3.2billion to cover the cost of finding a new supplier for the 2million households affected by the collapse of energy suppliers since early September, and for the 1.7 million additional customers of Bulb Energy, who have been handed over to a special administrator appointed to manage the large-scale collapse.
The Treasury documents said there was “a potential risk” that some energy suppliers and their shareholders could monetize large profits on assets such as hedges “for their own benefit, leaving the government and ultimately account, the general public will end up with the costs of ensuring the continuity of energy supply to customers”.
“The Government considers it unacceptable that, as consumers in the UK face rising energy bills, it would be possible for some companies and their shareholders to exploit this situation to the detriment of taxpayers and end consumers. “, add the documents.
A spokesperson for Ovo Energy said: ‘We support this and other recent announcements aimed at strengthening the resilience of the UK energy retail market.
However, the company added that it was “still unclear what – if anything – the government will do to help support vulnerable customers” ahead of the impending rise in the UK’s energy cap which is expected next week. next week.
Energy bills are set to soar to nearly £2,000 a year from April under the regulator’s energy price cap – from an average of £1,277 this winter – in the biggest bill increase since the cap was introduced in 2019. The government has been in talks to soften the blow to households, but no measures have been agreed.
“We hope this announcement is a sign of new initiatives to come to solve the current energy crisis,” the Ovo spokesperson said.