Energy companies are facing calls for a windfall tax on profits

The meetings come as the Unite union renews calls for a windfall tax on the firms' profits to help customers.

More than four million people are fuel poor - spending more than 10% of their income on energy bills.

The government hopes the industry will come up with a package to help them, preventing the need for a tax or levy.

However, an energy company source told the BBC that the government itself should do more to help the poorest consumers.

"The government wants an increased contribution to fuel poverty, but it works both ways," the BBC was told.

"The government takes hundreds of millions of pounds more in value-added-tax on domestic fuel than it puts into helping the fuel poor," the source said.

Unless energy companies are prepared to take genuine action...the government must take tough action and levy a windfall tax Dougie Rooney, Unite union

The company source claims that the government took �1bn in tax on domestic fuel during the 2006-7 financial year, and intends to spend �350m in 2007-8 to help the poorest bill payers.

A Treasury spokesperson said the EU sets minimum rates for VAT on domestic fuel and it currently uses the lowest allowable rate of 5%.

The UK's largest energy company Centrica, owner of British Gas, and E.On, formerly known as Powergen, met with Treasury Minister Yvette Cooper on Monday.

A Treasury spokesman says these are routine meetings ahead of the budget and would not make any further comment.

Windfall tax?

In January, British Gas revealed a large increase in profits - to �571m - shortly after increasing gas and electricity bills by 15%.

This caused anger amongst unions and poverty campaigners.

The Unite union on Monday renewed its calls for the Chancellor to announce a windfall tax on energy company profits in his Budget next week.

"The price increases that energy companies are imposing on their customers are plunging hundreds of thousands of new households into fuel poverty," Unite's Dougie Rooney said.

"Unless energy companies are prepared to take genuine action to help the 4.5 million people living in fuel poverty the Government must take tough action and levy a windfall tax," he said.

They are not social services departments. Neither are they entirely uncaring. David Porter, Association of Electricity Producers

Regulator Ofgem has identified a �9bn windfall coming to the electricity generating industry in the next few years.

Under the European emissions trading scheme, companies that generate electricity are granted a number of emissions permits for free.

But the permits are given a market value which is factored into the wholesale price of power and is contributing to higher energy prices for consumers.

Ofgem calculates these permits add �31 to each household's bills every year.

According to analysts at Deutsche Bank, giving the permits a value is the correct thing to do in accounting terms, but warned:

"Ultimately, it is the end consumers of electricity that have shouldered the main financial burden resulting from emissions permits being allocated free of charge," their report said.

The industry has reacted angrily to the prospect of a compulsory tax or levy on its profits.

"It is very damaging to dive in and suddenly impose huge unexpected taxes on companies that you expect to build �30bn of new infrastructure we need so badly," David Porter, chief executive of the Association of Electricity Producers said.

"They are not social services departments," he said. "Neither are they entirely uncaring."

Social tariffs

Energy companies say they already have schemes to help their poorest customers.

British Gas for example gives 25,000 of its poorest customers a rebate worth up to �90 and free insulation. It offers a "social tariff" to 340,000 people in fuel poverty, allowing them onto British Gas' lowest standard rate.

However, consumer body Energywatch recently said measures such as these "reach only 1 in 15 of the four million British households living in fuel poverty".

"British Gas contributes a much higher proportion of its turnover to fuel poverty than other companies and while our market share is about 33%, we contribute about 70% of funding going to fuel poverty, a Centrica spokesman said.

"We take this issue very seriously," he said.