United Kingdom

Kwarteng dismisses ‘alarmist’ fears over gas price crisis

Today News || UK News

UK energy updates

Kwasi Kwarteng, UK business secretary, has insisted there is “no question of the lights going out” this winter as ministers struggle to contain a growing crisis sparked by spiralling gas prices.

He told the House of Commons it was “alarmist” to suggest people would struggle to heat their homes in the colder months and said Britain had “sufficient capacity” to meet household demand.

Ads

“There will be no three-day working weeks or a throwback to the 1970s. Such thinking is alarmist, unhelpful and completely misguided,” he told MPs.

Ministers are in talks to set up an emergency scheme offering Britain’s energy companies state-backed loans to take on unprofitable customers from failed smaller rivals.

Kwarteng met with energy companies and consumer groups on Monday morning. With five energy suppliers having collapsed in recent weeks — and more expected within days — the business secretary said he wanted to ensure the least amount of disruption for customers.

Kwarteng is also preparing a deal to tackle the related crisis in carbon dioxide production, which is threatening to worsen supply chain disruption — the gas is used in the production of meat, steel, food packaging and fizzy drinks.

The government is holding talks this week with Tony Will, chief executive of US company CF Industries, which makes 60 per cent of Britain’s CO2 as a byproduct of fertiliser production at two plants in Cheshire and Teesside.

RELATED:  Line-up revealed for Bloody Scotland crime-writing festival

Kwarteng is looking to temporarily subsidise fertiliser production, which has been made uneconomic by high gas prices, according to officials briefed on the talks.

Gas prices in Britain and Europe have hit repeated highs in recent weeks as traders fear the continent is heading into winter with low stocks. This follows lower supplies from Russia and domestic sources as gasfield operators undertake maintenance delayed from last year.

Liquefied natural gas (LNG) supplies, which come via tankers, have also tightened globally because of strong demand in Asia and Latin America, creating a bidding war for cargoes.

Twice weekly newsletter

Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.

Wholesale day-ahead gas prices in the UK jumped 9 per cent on Monday to £1.77 per therm, with the rise showing little sign of abating ahead of the winter. Prices in the UK and continental Europe surged in the early afternoon after Russian state-backed gas company Gazprom signalled it was not planning to increase exports to Europe next month.

Energy suppliers have also been caught out because they are unable to lift prices beyond a government “energy price cap”, which only changes every six months. Kwarteng told MPs that the cap was “not going anywhere”, given its role in protecting consumers.

But the minister has been warned by the energy sector that out of 50 companies supplying the UK market, only 10 could be left standing by Christmas.

RELATED:  Jeane Freeman warns changes to shielding rules 'are for England only'

Over the weekend, lossmaking UK energy provider Bulb Energy was racing to secure its future and has asked its main bankers to help find new sources of funding. The start-up, which supplies electricity and gas to 1.7m UK customers, was being advised by longstanding bankers Lazard as it explored its options, said people with direct knowledge of the matter.

Rather than trying to save struggling companies, the government wants to offer financial support to persuade larger companies to take on their customers.

Ofgem, the regulator, on Monday said the 350,000 domestic customers supplied by People’s Energy, one of the companies that has failed, would be transferred to British Gas. The regulator said energy supplies would continue as normal and credit balances would be honoured.

The regulator has also asked energy providers to open their books and show their hedging strategies to better understand how exposed individual companies are to the surge in wholesale prices.

Kwarteng acknowledged there were likely to be “further companies” collapsing within days.

“The government will not be bailing out failed companies. There will be no rewards for failure,” he told MPs.

“Taxpayers should not be expected to prop up companies which have poor business models and are not resilient to fluctuations in price.”

He said the first option would be for Ofgem to act as a “supplier of last resort” by persuading larger companies to take on stranded customers, perhaps with the help of state-backed loans.

RELATED:  'Spineless' Scottish Tories told to stand up to Boris Johnson over benefit cuts

Suppliers want this implemented quickly, given four or five more companies are expected to go bust in the next week. “If we do this we have to move really quickly,” said one industry figure.

Some industry operators have privately questioned whether they want to borrow from the government to take on lossmaking customers, given the risk of huge losses if wholesale gas prices continue to rise.

The second option would be for the government to act as a special administrator if necessary, Kwarteng said.

People familiar with emergency calls that took place over the weekend compared the latter option to the creation of a “Northern Rock-style “bad bank” to house orphaned customers.

Kwarteng told MPs he does not want a return to the “oligopoly of the past” in energy provision. One industry figure who attended Monday’s round table said Kwarteng was determined to ensure that at least 10 suppliers were “lefty standing” by Christmas.

Ed Miliband, shadow business secretary, called on the government to take “all necessary steps” to ensure stability for customers and mitigate the effect of the wholesale gas price spike.

Additional reporting by Laura Hughes in New York

UK news Today Latest stories & updates More Headlines

Today News Post || UK News || World News || US Updates || Trending News || Technology News || EU News

Source

Tags
Show More

Related Articles

Back to top button
Close