Energy companies bust: Government not ‘complacent’, Kwarteng insists amid claims Ofgem warned of crisis
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The government has not been complacent over the energy crisis, Kwasi Kwarteng has insisted, after Labour’s Ed Miliband produced a letter he claimed was sent by regulator Ofgem to the business secretary 18 months ago warning of a “systemic risk” to the UK’s energy market.
A 250 per cent spike in wholesale gas prices has caused seven firms to collapse in a matter of weeks, with Avro Energy and Green becoming the latest to fold.
As figures from the regulator showed nearly 1.5 million households have now suffered their suppliers going bust, junior minister Paul Scully said it was “not going to be possible” to guarantee that their bills would not rise – contradicting assertions by Mr Kwarteng days earlier that customers being transferred to new providers should “be expected to pay the same amount”.
While all customers affected will continue to receive energy until Ofgem allocates them to a new – possibly more expensive – supplier, the regulator’s boss Jonathan Brearley warned MPs that the number of households affected “may well go well above” the hundreds of thousands.
Mr Scully also said it would be up to the energy watchdog to decide whether the price cap should rise. It is currently due to next be reviewed in April.
The business minister told Sky News the government was “planning for the worst-case scenario”, which he said was that gas prices would remain high beyond a short spike.
Both Mr Kwarteng and the regulator have insisted the cap should remain in place.
Soaring energy prices ‘could be tipping point’ towards renewables
“The current energy bull market is an unintentional, yet perfect storm for the UK's green energy transition,” said Chris Bowden, managing director of Squeaky, which is a marketplace for clean energy.
He added: “If we look beyond the current carnage, this could a tipping point for the market. In short, paying more for gas and power could spur on the deployment of renewable energy. If history has taught us anything it is that for change to occur, the boat needs to be rocked. Riding this wave of chaos could prove to be very beneficial in the movement towards clean power.”
"Let’s be frank; it is easy to get sucked into the excuse that wholesale cost is the primary cause of this crisis. Yes, wholesale cost has tipped the energy industry into chaos, but the primary cause of this comes down to the monumental amount of trailing losses in the industry based on unsustainable business models.”
Which energy firms have gone out of business and which are under threat?
My colleague Tim Wyatt has this guide to the business casualties of the spike in wholesale gas prices, and what to expect in the coming weeks.
Which energy companies have gone bust?
A slew of electricity and gas firms collapsed as gas prices spike
MP attacks Commons recess as UK ‘faces autumn of discontent'
Citing an “autumn of discontent”, SNP Commons leader Pete Wishart attacked the “nonsense of a conference recess”, telling MPs: “We will be taking a month off when the UK is facing an autumn of discontent, when hard-pressed families are facing one of the biggest assaults on their weekly incomes.
“As this House abandons its station to the conference halls and seaside resorts, there's Universal Credit cuts, energy prices going through the roof, a CO2 crisis, driver shortages, farming chaos, fishing chaos, an export crisis, the ending of furlough and Brexit killing a nation.
“This nonsense of a conference recess has surely run its course and it must now come to an end.”
Spike in gas prices set to push UK inflation above 4%, Bank of England warns
The Bank of England has warned of a bigger-than-expected rise in inflation due to rocketing energy costs and said the supply chain crisis was beginning to hamper Britain’s economic recovery.
The Bank cautioned that rising gas prices were set to push UK inflation above 4 per cent by the end of the year, but stuck by forecasts that the inflation leap would be only temporary as all nine members of the Monetary Policy Committee voted to keep rates on hold at 0.1 per cent.
Minutes of the latest decision revealed the bank has revised down its growth forecast for the third quarter by around 1 per cent since its August report, leaving the level of gross domestic product around 2.5% below its pre-Covid level.
Founder of bust company questions government bailout of US firm as energy suppliers allowed to fold
The founder of Green, which went bust yesterday, has questioned why the government has bailed out a US firm producing CO2, but not the seven energy companies which have sunk in recent weeks.
Taking aim at comments by business secretary Kwasi Kwarteng that the government will not be bailing out “badly run” companies, Peter McGirr said the folded firms had done nothing wrong, and had sufficiently hedged – investing to offset the risk of any price fluctuations.
Mr McGirr told the BBC’s Today programme: “If we’re all bad businesses because we’re not 110 per cent hedged, does that not make the fertiliser business a bad business? If they need within their supply chain gas to produce fertiliser and CO2, why do they get a bailout and we don’t?
“And that’s only for three weeks, so in three weeks’ time, when the market’s still in the same place, are the government going to keep writing blank checks for this to keep food on the table?”
He added: “As we continue on in this gas crisis – and it will continue through the winter, no doubt – you will see larger suppliers feeling the pain as well, and at some point, they will come cap in hand asking for a bailout.”
CO2 producer prepares to reopen
A second major carbon dioxide producer could be back online within days to ease the UK’s national shortage, a director has said.
Teesside-based Ensus can supply around 40 per cent of the UK’s demand for CO2 but the biofuels plant has been on an annual shutdown for routine maintenance.
The plant, at Wilton International, produces CO2 as a by-product of turning wheat into bioethanol - which can be used as a fuel or additive to petrol - and it should be back online next week.
Ensus director Grant Pearson said the shutdown had been planned six months ago, and the switch-on next week is still on schedule.
He said: “We make around 40 per cent of the UK’s demand so we don’t fix the whole problem - but we are part of the solution.”
Carbon dioxide is used in the food chain, to kill chicken and pigs, in health services and in the nuclear industry.
Government was warned energy firms could collapse 18 months ago, Ofgem letter reveals
The government was warned 18 months ago that some of the UK’s struggling energy companies faced possible collapse, a newly-released letter has revealed.
Regulator Ofgem wrote to business secretary Kwasi Kwarteng last March to warn him of the “systemic risk” faced by energy suppliers, urging the government to consider action to help stabilise the market. Adam Forrest reports:
Government was warned energy firms could collapse 18 months ago, letter reveals
Ministers ‘have left the country dangerously exposed’, claims Labour
BP to cut petrol deliveries
BP is to reduce deliveries of petrol and diesel to forecourts across the UK to ensure supplies do not run out, because of the HGV driver shortage.
The oil giant told the government in a meeting last Thursday that the company’s ability to transport fuel from refineries to forecourts was faltering.
Motorways will be prioritised and restocked as normal, according to reports.
BP does not employ HGV drivers directly, but outsources to independent haulier Hoyer. Joe Middleton reports:
BP petrol stations closed as lorry driver shortage hits UK
BP‘s head of UK retail Hanna Hofer described the situation as ‘bad, very bad’
North will be hit hardest by soaring energy prices, business secretary accepts
Kwasi Kwarteng has acknowledged that people living in the North will be hit hardest by soaring energy prices this winter.
Speaking in the Commons, Rachael Maskell said: “The rise in energy prices will disproportionately impact people living in the North because it is colder during the winter in the North. So what assessment has he made of the regional disparities and how is he going to mitigate against that?”
The business secretary replied that the Labour MP had raised “a very fair point and clearly in terms of the gas price the single most important determinant of it is the weather, and she's absolutely right, adding: “That's why we've got schemes like the Warm Home Discount and that's why we're absolutely focused on protecting the most vulnerable customers, wherever they are in the UK.”
What factors have led to the UK’s energy crisis? My colleague Ben Chapman reports:
Energy suppliers have been hit by a 250 per cent jump in the cost of gas this year. Sharply rising demand as the world has emerged from the pandemic has combined with a host of factors restricting supply.
An unusually cold winter left stocks low and a lack of wind has meant the UK relied more on gas than in previous years. Russia has provided less gas to Europe in a move that many believe is designed to exert its power over EU countries blocking the opening of the long-awaited Nord Stream 2 pipeline.
The UK is more heavily reliant than its European neighbours on gas but ministers have allowed storage facilities to be closed down in recent years.
Suppliers are not able to pass all of the rising costs on because many customers are on fixed-rate deals which have yet to expire and the government caps the maximum level that consumers can be charged for energy.
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