Spread high energy costs over several years, says Octopus Energy boss

Spreading the cost of high gas prices over a number of years is the best way to deal with price spikes, the boss of one of the UK's biggest energy firms has said.

Octopus Energy's Greg Jackson said it was the only option able to "make a real difference to all customers".

Spreading the cost would mean consumers would avoid hefty increases to their energy bills, he said.

Energy costs are expected to jump in April when the price cap is revised.

In an email to customers, Mr Jackson said: "Spreading the cost of this sudden spike over several years will allow us to make the imminent April rise much, much smaller - more like £12 per month - and adjust prices to gradually cover the cost over time."

The price cap, which sets the maximum rate suppliers can charge for a default tariff, means the typical household should pay no more than £1,277.

The new level for the cap, which applies to England, Scotland and Wales, is due to be announced on 7 February.

Industry trade body Energy UK has already warned that bills could jump by 50% this year unless the government intervenes.

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The government has been talking to the energy industry for a number of weeks to try to agree on a way forward to tackle soaring prices.

Goldman Sachs, the investment bank, said problems currently impacting gas supplies in Europe could continue into 2025. "The high energy prices seen in recent months are not necessarily a one-off," it said.

A number of options have been discussed, including reducing the 5% VAT on bills, increasing the Warm Homes Discount offered to people in receipt of certain benefits and shifting green levies - which fund renewable energy projects - from bills into general taxation.

Some form of financial mechanism to smooth prices, such as loans to energy companies to be paid back over a number of years, has also been discussed, though it is an option that doesn't have the full backing of the industry itself.

This month, the boss of Britain's biggest energy provider, Centrica, told the BBC he wasn't in favour of the move, and that it would amount to a "bailout" for the sector.

Octopus Energy's Mr Jackson told customers there were a number of options to finance such a scheme.

"Private funding can be found for deferring these costs which means we may be able to do it without Treasury funding", though he added: "Of course, that may be an option too".

He warned that when the price cap is updated in April, the average bill is likely to rise by as much as 75% compared to the same time last year.

"That's another £60 a month: a huge burden for most homes," he said.

He said a huge amount of effort was being made by energy companies, the regulator Ofgem, and the government "to try and ensure there is decisive, collective action that best protects as many households as possible".

But he acknowledged the outcome of the discussions currently taking place was uncertain.

"Honestly, I don't know if we'll be successful. But if we aren't, it won't be from lack of trying."