Gas price crisis: Government poised to step in, says Kwarteng

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

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The government is poised to step in to tackle the gas price crisis and carbon dioxide shortage, Business Secretary Kwasi Kwarteng has said.

The move comes as rising wholesale gas costs are forcing smaller providers out of business.

Mr Kwarteng told the BBC that lending money to bigger firms to help them take on stranded customers was an option.

He also said the government could subsidise the country's biggest carbon dioxide producer to bolster supplies.

The firm, CF Industries, has halted production at two UK plants because rising gas costs, caused by higher demand due to cold weather in Europe and Asia, have made them unviable.

Carbon dioxide is essential to the frozen food industry and the shortage has raised fears of more gaps in grocery supplies.

Mr Kwarteng said he had spoken twice to CF Industries' chief executive and was looking at ways to ensure production would resume "as quickly as possible", including subsidies.

However, he ruled out nationalising the company, saying he was "averse" to the idea.

Mr Kwarteng denied that failed energy companies would get government bailouts, saying: "I do not think it's the right thing for taxpayers' money to be injected into companies that have been badly run."

However, he said the government was exploring the possibility of lending money to bigger energy firms to help them absorb the cost of taking on new customers from companies that had gone bust.

"If we do have this policy, they will be expected to pay back the loans," he added.

Why are gas prices rising?

How could the CO2 shortage hit food supplies?

What happens if my energy supplier goes bust?

Farmers fear gas price crisis may spark pig cull

Limits on how much energy firms charge customers will stay, the government and the energy regulator have said, despite the price of wholesale gas reaching record highs.

On Monday, Mr Kwarteng and energy regulator Ofgem dismissed suggestions that the cap on energy prices would be lifted, saying that keeping it was the "clear and agreed position".

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

This limits how much firms can charge per unit of gas.

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

What happens if your energy supplier goes bust?

Customers will still continue to receive gas or electricity even if the energy supplier goes bust. Ofgem will move your account to a new supplier, but it may take a few weeks. Your new supplier should then contact you to explain what is happening with your account

While you wait to hear from your new supplier: check your current balance and - if possible - download any bills; take a photo of your meter reading

If you pay by direct debit, there is no need to cancel it straight away, Citizens Advice says. Wait until your new account is set up before you cancel it

If you are in credit, your money is protected and you'll be paid back. If you were in debt to the old supplier, you'll still have to pay the money back to your new supplier instead

Read more about the next best steps to take here.

On Monday, Mr Kwarteng dismissed fears of energy shortages, saying: "There is absolutely no question of the lights going out or people being unable to heat their homes."

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

The boss of one small firm, Utilita, told the BBC that it was not taking on any new customers because it could not afford to buy enough extra gas to supply them.

Utilita chief executive Bill Bullen said that for every 1,000 new customers the firm attracted, it would have to take on £250,000 in additional costs per week.

He said the government would end up spending billions of pounds on the crisis.

This money "would have been better spent on getting customers to reduce their energy consumption", he added.

If an energy firm collapses, customers are automatically switched to a tariff provided by the new supplier. This is a tariff agreed with the regulator Ofgem, but it may well be more expensive than the deal they had with the former company which went bust.

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

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.

The energy price cap was introduced in January 2019 and is reviewed twice a year.

It applies only to standard variable or default tariffs. These types of tariff are typically the most expensive plan that a supplier offers.

When fixed energy deals expire, as they generally do after one or two years, customers are likely to be put on these tariffs.

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.

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

Opposition politicians have expressed concern, with Labour's shadow economic secretary to the Treasury, Pat McFadden, describing the problems as a crisis that "should have been foreseen".

Liberal Democrat leader Ed Davey, a former energy secretary, has said it is proof that the UK government's energy policy has been "lamentable".

And speaking on BBC Two's Newsnight programme on Monday, the former Brexit Secretary, David Davis, warned there was a risk of a "cost of living crisis" for new Tory voters such as "the plumber, the bricklayer, the lorry driver".

He said his advice to Chancellor Rishi Sunak would be: "You think hard about the ordinary families' take-home pay and what they have to buy with it, because that will be a dictator of how people feel going in to the new year."

'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."