Dark Money Investigations: Investigation

Revealed: E.ON tried to get Kwarteng to cut its taxes while bills soared

The UK’s biggest energy supplier also felt threat from Don’t Pay UK was ‘existential’, exclusive documents reveal

Martin Williams
11 October 2022, 11.33am

E.ON lobbied for 0% VAT for the energy retail sector.


Ian Francis stock / Alamy Stock Photo

The UK’s biggest energy supplier spent the summer lobbying the government to cut taxes and avoid “intrusive” regulation, openDemocracy can reveal.

E.ON complained to Conservative ministers about the capping of energy bills, saying it had made the UK an “unattractive place to be an energy supplier”. Energy bills were expected to top £4,000 in 2023 at the time of E.ON’s warnings.

The company also warned about the “existential” risk posed by campaigners who threatened to stop paying their bills, saying it could result in a £265m loss per month across the energy sector.

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Documents obtained by openDemocracy show E.ON presented the government with proposals for tackling the dramatic rise in household energy bills and preventing energy firms from collapsing.

They included reducing VAT rates for energy retailers from 5% to 0%, claiming it was “needed to reduce costs”.

E.ON also urged the government to “avoid intrusive regulatory oversight” and give the Ofgem watchdog “greater flex over price protection”.

A price cap to limit the default energy tariffs energy firms could charge customers was introduced to mixed reaction in 2019. The government said it had saved customers up to £1bn in the first year alone and ensured people paid a “fair price” for their energy, while Labour also supported the move.

But E.ON’s chief executive publicly criticised the cap at the time, saying it would “reduce engagement, dampen competition and innovation”. The Liberal Democrats also opposed it, with one MP warning that many tariffs “will go up towards the cap” and industry competition would be hit.

The lobbying material obtained by openDemocracy reiterates E.ON’s opposition to the “punitive” cap, which the firm blames for financial losses in the energy sector. The company went on to complain that the UK government has “significant asks” for the industry “regards supporting customers as well supporting UK transition to net zero” [sic].

Slides from a PowerPoint presentation containing the proposals were shown to officials from the Department for Business, Energy and Industrial Strategy (BEIS) in August, while Kwasi Kwarteng was in charge.

eon market drivers.jpg

They were also shared with the Treasury, where an official told E.ON: “We used your data to provide written advice [to then chancellor Nadhim Zahawi, which] we expect him to read over the weekend.”

openDemocracy obtained the documents following a Freedom of Information request, although several sections were redacted.

A separate letter from the head of E.ON’s UK branch, Michael Lewis, was sent directly to Kwarteng and Zahawi – although the government refused to release any of it under the Freedom of Information Act.

Today, an E.ON spokesperson said the company had “consistently and publicly” stated its position on the energy price cap.

Risks ‘increased massively’

E.ON sent its PowerPoint slides to the Treasury just three days after the German-owned energy giant forecast €4.1bn (£3.6bn) in global pre-tax earnings for 2022.

“E.ON’s business performed as anticipated in the first half of 2022, despite the difficult environment,” it said.

Earlier in the year, the company’s chief financial officer told investors he was “extremely confident” about E.ON’s outlook, saying the supplier “will gradually pass on higher prices to our customers” if necessary.

Marc Spieker added that the company was “fully hedged”, meaning it had purchased energy in advance to ensure it had enough supplies.

But the lobbying material sent to Tory ministers this summer paints a different picture. E.ON warned about the prospect of energy companies collapsing and triggering financial chaos – which could mean even higher bills for consumers. Risks to the sector have “increased massively,” it said, adding that “even if we can hedge,” forecasting customer numbers will still be “extremely difficult”.

The warnings came as growing numbers of people threatened to “strike” from paying their spiralling energy bills. The “Don’t Pay” campaign had originally aimed to enlist a million customers who would pledge not to pay their bills when prices increased in October.

Documents now reveal how worried E.ON was about the campaign, saying it was “existential for the sector”.

“A million customers cancelling their direct debits on 1 Oct means a c£265 million loss per month across the energy retail sector meaning a c£45m loss per month for E.ON alone…

“Can’t pay or won’t pay, this is existential for the sector and will result in further major supplier failures. What is the government & industry’s response?”

don't pay campaign.jpg

Details of E.ON’s lobbying campaign follow separate reports today that Kwarteng held undisclosed meetings with senior executives of Saudi Arabian oil firms when he was the business secretary.

Records show that while visiting the country in January, he met the chief executive of Saudi Aramco, the world’s biggest oil producer and discussed “opportunities for the company” while on a flight funded by the company.

In a statement to openDemocracy, E.ON said: “We have consistently advocated for a range of reforms in our industry that would, we believe, reduce bills for customers and help spur people into making the greener choice. That includes removing VAT from domestic energy bills and from energy efficiency products, as well as moving social and environmental levies out of customer bills and funding them in a fairer way through government spending.

“It also means reforming market structures so we all benefit from cheaper, greener energy as well as a massive increase in energy efficiency support targeted at the least well-off in society and which drives economic growth for our small business supply chain.”

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