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Gas and Electricity Predicament 1

Barry Loughran

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With over half of the UK gas and electricity company's prices already raised twice this year, another threat has been made by the energy chiefs. If they are forced to pay a higher windfall tax then they will source their lost revenue through the public's household bills which is already at a staggering average of £1,500.

David Porter, chief executive of the Association of Electricity Producers said that “If you take money out of the companies and they have to find it somewhere else, then their investment costs will go up and customers will have to bear the brunt of that, "

"There has been no windfall. Many of the retail arms of power companies have struggled to make money and have held down their prices to customers, while wholesale prices have soared" he added.

Gordon Brown has been forced into this situation as he needs to impose a new levy on the energy company's profits. This is reinforced by over 70 of his labour party members, but the government still remains diverse as how to tackle this problem.

Another solution favoured by Gordon Brown is to increase tax on pollution which will see £500 million generated, nowhere near what is needed according to windfall campaigners. If the windfall is introduced it will rescue over 500,000 people out of fuel poverty.

This puts the government into a very tricky situation. They can help the public in the short term by introducing the levy but at a crucial time when the energy companies need the extra cash to build their new energy sources, taking up to 11 years but will, in the long term, put them in a position to control their costs more.

Cheap gas and electricity may be available once these new energy sources are built but the gas suppliers would need the government to waive any levy to do so. The cost of utilities may soon be back to normal.


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