U.K. Energy Cap Non-Negotiable, No Bailouts, Kwarteng Says
Kwasi Kwarteng said there are no bailouts on the cards for struggling U.K. energy companies, and that the government will retain its price cap to insulate consumers from surging wholesale gas prices.
The U.K. business secretary spoke as the government attempts to mitigate the impact of gas prices on various stakeholders, from households to large industrial users to suppliers.
“I’ve been very clear that we’re not going to bail out failing energy suppliers,” Kwarteng said on the BBC’s “Andrew Marr Show.” Between five and eight companies typically leave the market each winter, he added.
Sky News reported Sunday that BP Plc-backed Pure Planet is the latest supplier that’s close to collapsing, and that talks are under way with the regulator Ofgem to start the supplier-of-last-resort process.
“We expect more [energy] retailers to go out of business, yes,” Emma Pinchbeck, chief executive of the trade association, Energy UK, said on Sky. “We have had retailers leaving the market in previous years, but this year it is how many are failing at once.”
Kwarteng said keeping in place the U.K.’s current energy price cap for consumers is “non-negotiable.”
“I can’t say it enough times, that the price cap is staying,” he said on Sky News. “I’ve been very clear that it can’t be moved, because it does offer consumers the protection that we need.”
Some energy firms have lobbied Prime Minister Boris Johnson’s government to raise the cap as they face a squeeze from higher input costs. Wholesale gas prices have increased almost sixfold over the past year.
“At the moment, if we buy gas and electricity in the wholesale market energy, companies are losing a lot of money for every unit they sell,” Stephen Fitzpatrick, founder and chief executive of OVO Energy, said on the BBC.
The consumer price cap rose 12% on Oct. 1 and could increase a further 30% from April, when it’s next recalculated, according to industry consultant Cornwall Insight Ltd.
Kwarteng told the Daily Express he wanted to assure Britons “of the safety net that we have in place to shield consumers from instant price hikes this Christmas, and ensure everyone gets the supply they need.”
Asked whether residents should simply bundle up at home to limit their heating costs, Kwarteng said that people should “do what they’re comfortable with.”
“My job isn’t to tell people how many layers of clothing they should wear,” he said.
The energy price cap, which is adjusted twice a year, protects households to some extent, but large factories are more exposed. On Friday, Kwarteng met with officials from energy-intensive companies and said he would work to ease the growing pressure on industry from surging gas prices.
The government is “having a conversation” on ways it may be able to support users like the steel, chemical, cement, paper, ceramics and glass industries, Kwarteng said on Sky, without offering specifics.
Kwarteng also said that he was in ongoing talks with the Treasury about ways to support industry. Those comments received some push-back from within the government, according to Sky News, with an unidentified Treasury official denying any talks were under way. The opposition Labour Party jumped on it the spat and called on the government to “get a grip.”
Fitzpatrick said that the government’s focus should be on protecting at-risk consumers, not big energy users.
“There is only so much money to go around, and we have to put the lowest-income households first,” he said. “If you’re a large energy user you should be hedging for your demand ahead of time.”
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