Gas crisis ‘could cause three-day-week’ amid more emergency talks

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Ministers were warned that they must act to keep the ‘lights turned on’ today amid fresh crisis talks over gas shortages – with taxpayers facing spiking bills and footing massive bailouts for stricken energy firms.

Fears are mounting about the consequences of soaring wholesale gas prices – up 70 per cent since last month – that are sending providers to the wall and causing chaos for a range of industries.

Experts say that as well as spiralling bills for household energy – which for some could nearly double by April –  food supplies and even medical procedures are at risk as the pressures cause shockwaves across supply chains. 

One consultant said the problems are so huge they could ‘easily see a three-day working week’ across affected companies this winter, evoking memories of the carnage in the 1970s. 

Iceland supermarket boss Richard Walker told the BBC this morning that he was ‘shocked’ by how exposed the UK was to disruption. 

‘This is no longer about whether Christmas will be OK,’ he said. ‘This is more about keeping the wheels turning and the lights on so we can actually get to Christmas.’ 

Business Secretary Kwasi Kwarteng has held more discussions with the energy industry amid calls for bailouts, and will make a statement to MPs later. 

Five energy suppliers have gone bust recently. British Gas has agreed to take on an extra 350,000 domestic customers from one of the casualties, People’s Energy.

The Government could provide a loan to other firms taking on their customers, or even effectively nationalise small suppliers on the verge of collapse by appointing a ‘special administrator’.

However, there are concerns that other firms will still refuse to take on the consumers. Other options include creating a ‘bad bank’ to take control of entities that can no longer operate on their own.

No10 has also pointedly refused to rule out changes to the energy price cap, amid concerns it is warping the market.  

The UK’s sixth largest energy company, Bulb, was among those seeking help today.

The FTSE 100 tumbled to a two-month low this morning as gas supply fears combined with rising inflation to send a chill through financial markets.

Energy stocks were also among top losers, with shares of heavyweights Royal Dutch Shell and BP falling 1.5 per cent and 0.9 per cent respectively.

Tory MPs have joined energy firms in demanding Boris Johnson scraps or suspends green levies on consumer bills.

London Mayor Sadiq Khan insisted the government must ensure vulnerable customers are protected from price rises.  

But the PM, who is at the UN general assembly in New York, tried to quell rising panic by insisting the problems should be ‘temporary’. 

He said the energy squeeze was a result of the ‘world waking up from pandemic shutdown’, comparing it to everyone ‘going to put the kettle on at the end of the TV programme’.

Asked whether the Government would consider scrapping green levies, a Downing Street spokesman said: ‘We’ve spoken at length and the Prime Minister has spoken at length about the importance of renewable energy sources and his commitment to reducing carbon dioxide emissions here in the UK.

‘I’ll point you to the targets that we have clearly set out with that regard, and that levy’s an important part of driving our energy supply to renewables.’

A spokesman for the Prime Minister said: ‘I’ve talked about the energy price cap and what it does and why it remains in place to protect customers, as I say, from sudden increases in global gas prices, and it saves them a lot of money during the winter and autumn months when it is colder.’

Pushed on whether he would therefore rule it out, he added: ‘Well, again, as I say, the energy price cap remains in place, and I’m not aware of any change to that at all.’

He said: ‘It’s in place to protect people’s energy bills. That’s what it does, that’s what it has done, and as I say, it’ll continue to do so.’

No 10 insisted the UK food chain is ‘incredibly resilient’ amid warnings a lack of CO2 – a knock-on effect of the gas crisis – could make the situation even worse.

‘We’ve got a highly resilient food supply chain in the UK, we’ve seen that throughout the pandemic, and we will obviously continue to work with industries that are facing issues to ensure that remains the case,’ the spokesman said.

‘As I’ve just said, we have an incredibly resilient supply chain when it comes to food and we’re well prepared to handle any potential disruptions.’ 

Foreign Office minister James Cleverly said he was ‘not going to speculate’ over whether the Government would step in to support energy businesses.

Mr Cleverly told Sky News the Business Secretary had already held ‘very productive’ meetings with industry players.

Asked whether energy companies could be bailed out, Mr Cleverly said: ‘I’m not going to speculate as to exactly how we address this, but we’ve moved quickly and the Business Secretary of State’s already had a series of meetings about this both last week, and over the weekend, and we’ve got a very clear idea of what our priorities need to be in terms of protecting consumers and protecting the security of our energy supply.’

Pushed on whether he was therefore not ruling it out, he added: ‘We are considering a range of options.’ 

Mr Cleverly denied there was any connection between the growing energy crisis and Brexit.

Asked if there was a link, he told LBC: ‘No, no, this is hitting a number of countries around the world and it is – I think the Prime Minister summed up rather well – this is a byproduct of the sudden increase in demand as we come out of Covid.

‘Globally, the UK is in a better position than many countries because, obviously, we have a domestic gas production capability, and our imported gas is from very, very reliable partners like Norway. So whilst this is affecting many, many parts of the world simultaneously, actually the UK is in a better position than many.’ 

In the past month, five suppliers have already been forced to close and analysis by business management consultants Baringa shows that 39 suppliers could also collapse in the next 12 months, The Times reports. 

Bulb, an energy provider to 1.7million customers in the UK, is among the suppliers seeking a bailout amid pressure on the industry.

On Saturday, Mr Kwarteng held talks with energy suppliers on and their regulator Ofgem amid fears dozens of companies could go to the wall.       

Today, the country’s biggest power firms, including Eon and Centrica, will also call on business secretary to help Britons by removing the cost of green subsidies from payments. 

Dale Vince, chief executive of green energy supplier Ecotricity, has warned many energy companies will not make it to Christmas and said action must be taken to remove price caps and tax on energy bills while building renewable energy ‘as if there’s no tomorrow’.

Mr Vince told the BBC’s Today programme: ‘We’ve got a shortage of electricity at the same time there’s a global shortage of gas. You can’t fundamentally fix that, it’s a question of what sticking plasters we can apply to get through the winter.

‘The energy market is in crisis anyway. Small suppliers have been going bankrupt at the rate of one in every six weeks for the last two years.

‘There’s two kinds of energy company, those that are hedged – which means they have bought their electricity and gas going forward – and those that haven’t. Those that haven’t are going to go bust.’

He said other energy companies would refuse to take on the customers of collapsed companies because it would be ‘asking for trouble’.

He added: ‘We have fundamental problems in the energy market. We have a price cap that sets the energy price super low which allows a margin of about 2 per cent for energy companies which is suffocating.

‘We’ve got a Government stealth tax amounting to 25 per cent on everybody’s electricity bill which really needs to be removed. And, of course, we’re dependent on foreign markets for oil and gas.

‘We need to build renewable energy as if there’s no tomorrow. In the next 10 years we could go 100 per cent energy independent in our country for electricity and gas.’ 

Scott Byrom, Chief Executive Officer of TheEnergyShop.com, told MailOnline the 650,000 customers at the five energy companies to have folded in the past month were likely to paying around £850-a-year for their energy because of the deals on offer in 2019 and 2020.

They could now face a hike to £1,277 from October 1 due to the energy cap rise, and may be paying as much as £1,500 by next April. 

The government’s price cap limits the rates a supplier can charge for electricity and gas on their default tariffs. 

It is set by Ofgem for summer and winter based on the underlying costs to suppliers.  

There are growing fears of gaps on supermarket shelves as ministers failed to achieve a breakthrough in talks over shortages of carbon dioxide (CO2). 

Record gas prices have led to two of the country’s largest fertiliser plants pausing production.

The sites in Teesside and Cheshire, which are run by US firm CF Industries, produce around 60 per cent of the country’s CO2 as a by-product from the manufacture of fertiliser. 

The gas is vital to the supply of food and is needed by hospitals and the nuclear industry. 

It is used as a preservative in fresh food packaging and in the transport of frozen goods – in dry ice form. It is also used to stun chickens and pigs prior to slaughter. 

Nick Allen, chief executive of the British Meat Processors Association, said the country could be two weeks away from British meat disappearing from supermarket shelves.

He told Sky News: ‘The meat industry, in particular the pig and poultry industry, use CO2 for humane slaughter. Eighty per cent of pigs and poultry are slaughtered using that process.

‘CO2 is a by-product of fertiliser. Those plants closed, and they account for about 60 per cent of the CO2 produced in this country. They closed at very short notice with no warning. It really hit us cold.

‘We’re hoping and praying the Government can negotiate with these plants to reopen. But even then, it’ll take about three days to restart.’

Mr Allen said meat manufacturers have said they have between five and 15 days’ supply left.

He added: ‘Then they will have to stop. That means animals will have to stay on farms. That will cause farmers huge animal welfare problems and British pork and poultry will stay off the shelves. We’re two weeks away from seeing some real impact on the shelves.’

Mr Kwarteng yesterday held talks with CF Industries boss Tony Will in a bid to persuade him to restart production. 

But Mr Will, who flew into the UK from the company’s headquarters in Illinois, said it was not commercially viable while gas prices remain high. 

Whitehall officials have been drawing up possible options to incentivise the firm to restart production ahead of further talks in the coming days.

Clive Moffatt, a gas consultant and former government energy adviser, told the Telegraph prices for industry could go ‘through the roof’. 

He said some companies could ‘easily see a three-day working week’ this winter if the situation gets worse.

And Iceland managing director Mr Walker said: ‘This is not an issue that is months away, that is for sure.

‘We are building up our stocks on key lines like frozen meat just to make sure we can deal with any unforeseen issue.

‘At the moment we are fully stocked and our suppliers are OK, but we do need this sorted as quickly as possible.’

Shadow business secretary Ed Miliband insisted the crisis was down to a failure of government planning ‘over the last decade’ – glossing over his own record as energy secretary, 

‘A basic duty of government is to ensure secure, affordable energy supplies for businesses and consumers. It is a fundamental failure of long-term government planning over the last decade that we are so exposed and vulnerable as a country and it is families and businesses that are paying the price,’ Mr Miliband said.

‘The Government must take all necessary steps to ensure stability for customers and do everything in its powers to mitigate the effects of this crisis on businesses and consumers.

‘Yet it is making the squeeze on household finances worse by putting up taxes for working people and cutting Universal Credit.’

Mr Kwarteng will today host a round table with the energy industry and consumer groups over concerns about the domestic supply of gas and electricity.

Ministers fear more small power firms could go bust within days – five have already in collapsed in recent weeks. 

The Business Secretary yesterday finalised contingency plans for what will happen if more suppliers cease trading.

There are concerns that energy regulator Ofgem may be unable to find companies willing to take over customers’ accounts if gas prices continue to rise.

If this happens, the Government will step in to take over the running of a collapsed firm until it can be rescued or customers moved to a new supplier. 

The bosses of some of the biggest energy companies will use their meeting with Mr Kwarteng to urge him to get rid of green levies in customers’ bills.

Eon UK boss Michael Lewis wants the renewable energy subsidies to be funded through general taxation instead. 

He has said that removing such additional costs is a ‘short-term imperative’ to help consumers during what is ‘going to be a very challenging winter’. 

British Gas owner Centrica has backed his calls. 

Tory MP Craig Mackinlay, who heads the ‘Net Zero Scrutiny Group’ of Conservatives, told MailOnline that the situation was ‘extremely serious’ and the UK was facing ‘fuel poverty’ this winter unless Mr Johnson rethinks climate levies.

‘The key is we have to remove the green levies because we cannot have these ridiculous prices being passed on to consumers, because we then will have energy poverty this winter,’ Mr Mackinlay said.

‘It is very obvious, we have to get rid of green levies temporarily or permanently. We need rapid structural reappraisal of our dash to net zero.

‘The primary role of government is to keep the show on the road, the lights on, people warm and businesses able to do what they do.

‘And we are getting perilously close to a failure of those primary functions. That does mean considering domestic gas production as far as we are able.

‘And no matter how unpalatable fracking has to be within that frame.’

He added that North Sea Oil should also be exploited as much as possible, gas storage boosted, and nuclear policy clarified after being ‘confused’ for decades.

‘The transition to Net Zero is going to be over a long period of time. Fossil fuels will be part of the mix for a long period of time. So it makes sense to be as domestically secure as we possibly can,’ he said.

‘This is putting into focus the parlous state of our energy policy or lack of it that we have had for 20 years. 

‘Governments of all persuasions have completely taken their eye off the ball for 20 if not 30 years.’

Former Cabinet minister John Redwood said: ‘With a chronic shortage of gas, little wind power and a dangerous dependence on imports he needs to change policy.

‘He needs to persuade the gas industry to open more gas storage. Germany has five times as much and France seven times as much proportionate to demand.The government needs to build a strategic reserve if the industry cannot.

‘He needs to liberate new Uk production from existing fields and stimulate more exploration and development. The UK is going to need a lot of gas for some years to come. It is cheaper, greener and safer to produce our own rather than import.’

Sir John added: ‘The energy market is so rigged by regulation, tax and subsidy it will take government interventions to sort out the current shortages.’

Ministers last night sought to reassure the public there was no imminent threat to power supplies. 

Government climate change chief Alok Sharma told Sky News: ‘The clear message that is coming out of this is that there is no immediate concern in terms of supply. 

‘We don’t see any risks going into the winter. People should be confident that the supplies will be there and that we will be protecting them in terms of price rises. But of course we are not complacent about this.’

Asked about possible problems with food supply, Mr Sharma told Times Radio: ‘The Government is working very hard on all of this… We want to ensure there are not disruptions when it comes to food on shelves and in terms of CO2 available in hospitals and other places. 

‘It’s very important to underline the fact that we do feel that there is a security of supply at this point in time. 

‘We’re not expecting any change in that.’ 

Mr Kwarteng last night said he had been assured by Ofgem boss Jonathan Brearley there were ‘well-rehearsed plans in place to protect the market and consumers’. 

In a series of tweets, the Business Secretary wrote: ‘I understand this will be a worrying time for businesses and consumers. 

‘We are working hard to manage the impact of global gas price rises.

‘Unfortunately, small energy suppliers are facing pressures due to sudden increases in global gas prices… If a supplier fails, Ofgem will ensure customers’ gas and electricity supply will continue uninterrupted. Our priority is to protect consumers.

‘If a ‘supplier of last resort’ is not possible, a special administrator would be appointed by Ofgem and the Government. 

The objective is to continue supply to customers until the company can be rescued or customers moved to new suppliers.’

Mr Kwarteng said he and Mr Will had ‘explored possible ways forward to secure vital supplies, including to our food and energy industries’. 

Time for our leaders to stop being so naïve about energy 

 By Alex Brummer for the Daily Mail

The prospect of Christmas without turkeys and families shivering in their badly insulated homes is hardly an alluring one.

But with Russia playing hardball with natural gas supplies to Europe and the power links between France and Britain temporarily disabled by fire, it finally should be dawning on our politicians that as worthy is Britain’s dash to be the G7’s greenest economy may be, our current system of energy supply is woefully ill-equipped to cope with the transformation.

Business Secretary Kwasi Kwarteng is trying to cobble together a temporary rescue plan for the food supply chain and gas supplies.

Even if this happens consumers – both ordinary households and big energy users such as the steel industry – face horrendous price increases which could trigger a catastrophic rise in inflation.

The greatest paradox in the present energy crisis is that it has set off a chain reaction: there is a shortage of cheap gas to fire up fertiliser plants which, in turn, produce the carbon dioxide needed to keep food supplies plentiful.

In other words, the UK’s determination to become carbon neutral has drawn attention to the important role which CO2 – vital for the food and drinks industry – actually plays in our day-to-day lives. What is potentially really humiliating for Boris Johnson’s government is that this debilitating episode comes on the eve of the COP26 climate change conference in Glasgow that starts on October 31.

What the crisis reveals is the shocking geo-political naivety over the years of this country’s leaders when it comes to energy policy. The current policy is still highly dependent on natural gas. And it assumes that natural gas, which globally is in plentiful supply, will always be available as a backup when wind turbines fail to turn and our aged fleet of nuclear plants are shut down for maintenance.

But it is an energy policy that assumes there is a benign regime in Moscow, open shipping lanes in the Middle East and that inter-connectors – or power links –between the UK and France and the UK and Norway are in fine fettle.

Yet if just one of these assumptions proves mistaken, gas supplies are reduced and the price of the natural gas that does arrive soars.

Among the reasons that German Chancellor Angela Merkel has been so fawning towards President Putin is that she recognises he holds the whip-hand on gas supplies.

That is because Gazprom, the Russian energy behemoth, controls the flow of gas from deep in the Urals into Germany as well as much of the rest of Europe, including Britain eventually.

The fact is that the UK is at the end of a very long pipeline, with supplies pretty much dependent on Putin’s whim. And yet we have an eco-minded government that, because of its determination to meet carbon targets, is determined to end our use of coal and reluctant to grant new oil-drilling licences, for instance, to firms wishing to further develop the Cambo oilfield near Shetland.

Other European nations, such as the Netherlands, have dealt with the Moscow threat by building huge storage capacity which can withstand months of disruption. In the UK our biggest storage at Rough off the coast of East Yorkshire was shut down in 2017 because of safety and leakage concerns.

The belief was that secure liquid natural gas supplies, arriving from Qatar, would ensure constant availability.

That judgment has proved flawed. The surge in gas prices in August and September has been truly frightening and is why the fertiliser processor CF Industries – quoted on the Nasdaq stock market in the US – closed down its operations, strangling supplies of carbon dioxide for the food industry.

Carbon dioxide is used in the nation’s abattoirs for stunning livestock before slaughter and has led to squeals of protest from the pig producers and turkey specialist Bernard Matthews. In frozen form carbon dioxide is used to produce the dry ice required to deliver fresh meat and poultry supplies to supermarket shelves safely.

Incidentally, in much smaller quantities dry ice is used to keep the Pfizer Covid jabs fresh on their way to vaccination centres. Even if new supplies of natural gas are secured, there will be the impact on inflation.

And the numbers are startling, with the price of wholesale natural gas climbing by a staggering 800 per cent in August. That alone could add up to £400 to energy bills this autumn leaving those least able to pay without heating in their homes.

The great breakthrough of a competitive energy market, where consumers can change suppliers at a click of a mouse on price comparison sites, is vanishing before our eyes.

The newer players are falling like ninepins with four going into liquidation in recent weeks and many more on the danger list.

Ofgem, the regulator, will likely have to raise the cap, the highest average price for households, to a much steeper level.

The point is that energy prices do not stand alone.

They form a large part of the costs of every domestic manufacturing process including steel, cars and food. The UK’s consumer prices index soared to 3.1 per cent in August, in a development which the Bank of England describes as transitory, a posh word for temporary.

That increasingly looks far too optimistic. The inflation genie has been released and getting it back in the bottle could be hugely disruptive.

Will gas supplies run out, how high might bills rise – and why on earth is is affecting food supply? All your energy crisis questions answered

Why are gas prices up?

Wholesale gas prices have soared by 250 per cent since the start of this year because of a squeeze on supplies, according to Oil & Gas UK. From last month, they have gone up 70 per cent and are now at a record high. A long winter meant European countries built lower gas stocks than usual in the summer, while Russia has been providing less gas to Europe. The situation has been made worse by lower wind turbine output and a fire shutting down a cable bringing electricity into the UK from France.

What about my bills?

Around 15million households in England, Wales and Scotland already face a 12 per cent rise in bills from next month when the price cap goes up. 

This is the maximum price suppliers can charge standard tariff customers and is set by Ofgem. 

The cap will increase by £139 to £1,277 on October 1 but it is predicted it could go up by a further £280 when it is reviewed in April. 

Customers who like to find cheaper tariffs currently have fewer options as most of the best deals have been withdrawn.

Why are firms failing?

Five small energy suppliers – Hub Energy, PfP Energy, MoneyPlus Energy, People’s Energy and Utility Point – have ceased trading after being hit by the price rise. 

It is feared a further four could go bust this week as they struggle to supply customers at promised prices. 

Households whose supplier collapses will still receive gas and electricity while Ofgem moves them to a new provider. 

If the regulator is unable to find one it will appoint a temporary special administrator.

What about CO2?

Two of the country’s largest fertiliser plants have paused production due to record gas prices. 

The Teesside and Cheshire sites, run by US firm CF Industries, produce 60 per cent of the UK’s CO2 as a by-product.

How is it affecting food?

CO2 is used to stun pigs and chickens before slaughter. Poultry suppliers warned they only have two or three days of CO2 left. 

The gas is used in fresh food packaging, in beer and fizzy drinks, and is needed by hospitals and the nuclear power industry. 

Business Secretary Kwasi Kwarteng yesterday sought to persuade CF Industries chief executive Tony Will to restart production. 

But Mr Will, who flew in from the US for the meeting, said it is not commercially viable whilst gas prices remain high. 

The Government was last night considering how it could incentivise the firm to begin manufacture again ahead of further talks in the coming days.