Government To Knock The Wind Out Of Energy Companies

The UK Government could slap a 1 billion pound windfall tax on major energy companies after noticing their high profit margins and recognizing the hardships faced by ordinary Britons, especially its senior citizens. This tax could be spread over a period of 4 years and could help during the winter months, when pensioners are forced to pay an additional 50 pounds in their energy bills.

As a result, energy companies such as EDF, Npower, Scottish Power, EON, etc will have to shell out around 200 million pounds each per year from September onwards due to this windfall tax and the money will then be sent to around 4 million pensioners over the age of 70. This proposed windfall tax could be announced in the forthcoming Budget session. More than half of those pensioners are already in a dire state since more than 10% of their income goes towards paying off these energy bills and the situation worsens during wintertime. Pensioners over 60 years of age are already getting 200 pounds and those over 80 years are also getting a 300-pound subsidy from the government. The Government along with the energy Regulator ‘Ofgem’ has thus come up with a forceful solution, which will put pressure on these energy companies to part with some of their profits so that pensioners who have seen their energy bills go up by around 60% during the previous 4 years, can now breathe easy. Since this winter subsidy to pensioners costs 2 billion pounds per year to the UK Government, they can now shift half of this burden on the shoulders of the energy firms, which have been criticized since the past year for raking in record profits at the cost of the common man.

The government’s thinking is in line with ‘Unite’, which is the UK’s biggest union and is also planning to start a protest campaign against the energy companies, which they feel are only interested in making record profits. The energy companies are however justifying their record profits by claiming that they will need huge amounts of money to be pumped into green projects in the future since they will have to meet new emission rules. These energy companies are expected to receive a 9 billion pound windfall amount from the European Union Emission Trading Scheme over the period of the next 4 years if they can cut down their carbon emissions. Some people do feel that the government is still not taxing the energy companies enough as compared to their expected profits and the windfall amount, which they will be receiving in the coming 4 years. Some analysts also feel that these energy companies, instead of competing with each other have formed a cartel and are therefore able to charge consumers at will. So, for the rest of the British public, apart from the pensioners, will still not be safe from any further increases in their energy bills. Also with talk floating around of Gas producing countries forming a cartel similar to Opec, the prices of both crude oil and gas could soon touch new heights as the common man will have to ultimately pay the price in the future.

With the latest news in that energy companies have drastically raised the rates of consumers who are consuming less energy, such as people with second homes, or even people who are judiciously using their power, these companies seem to be sending the wrong message of punishing people who are using less energy. So, it remains to be seen whether this year’s budget can re-direct some of the profits of these energy companies back to the elders who really need it.

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Article written by: Craig Parker - Make Money Expert