Gas crisis: Energy price cap will stay, say Kwasi Kwarteng and Ofgem

https://www.bbc.co.uk/news/business-58634106

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The energy price cap will stay, the government and the energy regulator have announced - despite the price of wholesale gas reaching record highs.

Customers on some tariffs are protected from sudden hikes in wholesale gas prices through the energy price cap.

However, the cap means firms are unable to pass on higher wholesale costs, which is forcing some - mostly smaller companies - to go out of business.

The cap covers 15 million households across England, Wales and Scotland.

Why are gas prices rising?

What happens if my energy supplier goes bust?

Farmers fear gas price crisis may spark pig cull

On Monday, the business secretary told MPs that fears of a three-day working week were "alarmist", despite a worldwide squeeze on gas and energy supplies that has caused wholesale prices to rise by 250% since January.

He said: "There is absolutely no question of the lights going out or people being unable to heat their homes."

The cost of the wholesale price surge is partly being covered by a 12% rise in the energy price cap next month - the maximum price suppliers are allowed to charge customers on a standard tariff.

On Monday evening, Business Secretary Kwasi Kwarteng and energy regulator Ofgem dismissed suggestions that the price cap would be lifted, saying that keeping it was the "clear and agreed position".

There had been some speculation that the cap could be removed between now and next year to ease pressure on struggling energy firms.

So far, four energy firms have gone to the wall, including People's Energy and Utility Point, and four more are expected to follow in the coming days.

What is the energy price cap?

The energy cap is the maximum price suppliers in England, Wales and Scotland can charge customers on a standard - or default - tariff

Ofgem sets the cap level for summer and winter based on the underlying costs to supply energy

Energy bills are already due to rise by an average of £139 a year in October, but the price cap restricts further price hikes over winter

The current price cap is £1,138 a year for standard tariffs, but will rise to £1,277 in October

Industry sources fear there may be as few as 10 energy suppliers left by the end of the year, down from 70 in January.

Mr Kwarteng and Ofgem said if suppliers failed, they were "committed that consumers face the least amount of disruption possible".

"The top priority must be ongoing support for energy customers, especially the elderly and vulnerable," they said.

'I'm just watching the meter go up'

Stacey Stothard is waiting to see how much more she will have to pay

Stacey Stothard followed all the advice. Aware that energy prices were rising, she shopped around to find a decent fixed deal for her gas and electricity.

She saved £300 - or so she thought.

Her new energy supplier went bust and now she will be switched automatically to another one, and she is facing much higher bills, potentially amounting to hundreds of pounds more a year.

"It is just like watching the meter go up and up," she says. "I did the right thing - not going for the cheapest deal, but choosing a company with a decent customer service record."

Read more about her story here.

Pressure on gas and energy supplies across the world this year has been caused partly by cold weather in Europe which left gas stocks lower than usual, along with increased demand from Asia which also suffered from colder weather.

But the government and Ofgem said the UK did not have supply issues and instead had a diverse range of gas sources "that can more than meet demand".

However, energy bills are facing particular pressures in Great Britain because of a dip in renewable energy supplies due to low wind, and the outage of a power cable supplying electricity from France.

Supermarkets and food manufacturers are also battling with the knock-on effects of soaring gas prices.

They rely on carbon dioxide supplied by the fertiliser industry to keep food fresh for longer and stun animals before slaughter. But gas prices have caused some fertiliser plants to stop production.

Pig farmers fear the backlog of animals on their farms may mean they may have to start killing pigs on-site rather than in abattoirs, meaning the meat cannot enter the food supply chain.

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