Energy firms demand price cap is scrapped due to soaring cost of gas

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Britain’s floundering energy companies today urged the Government to scrap the price cap and allow them to add hundreds of pounds to the average bill as the UK wholesale price of gas soared to a record high and suppliers went to the wall at the rate of one a week.

But Business Secretary Kwasi Kwarteng has hit back saying it ‘will remain in place’ and denied consumers face a winter of discontent telling the Commons ‘there is no question of the lights going out’ of a three day working week.

Mr Kwarteng met with panicked energy bosses yesterday in Whitehall and was told in no uncertain terms energy firms who demanded he abolish or raise the cap due to hit £1,277 from October 1. Experts believe it needs to be closer to £1,500.

‘The energy price cap, which saves 15 million households up to £100 a year, is staying. It is not going anywhere,’ Mr Kwarteng told the Commons. 

Seven firms have collapsed in 2021 in total and many have only been in existence for five years. Experts have predicted that up to 39 more could go in the next year with the firms telling Mr Kwarteng yesterday that the cap on bills makes them lose money.

One senior industry source told the Telegraph: ‘For the time the price cap has been in place, suppliers have generally been losing money or making very tiny margins.

‘So the price cap is great for consumers, but companies are really struggling. There have definitely been unintended consequences.’

Four out of five UK energy companies are at risk of going bust because of the soaring cost of gas and electricity leaving millions of Britons facing the prospect of paying up to £400-a-year more almost immediately with no hope of a cheaper deal, experts warned today. 

The crisis is expected to hit huge numbers of people after wholesale energy prices went from a record low last May because of a lack of demand due to global lockdowns to the highest rates seen since the 1990s. 

In a statement to MPs yesterday afternoon, Kwasi Kwarteng said wholesale prices ‘could be high for longer than people anticipate’ and it ‘may well be’ that more suppliers ‘exit the market’ in the coming weeks. However, he argued that was ‘not unusual’ and there were systems in place to cope.

The Business Secretary stressed there would be no ‘rewards for failure’ or government money to bail out those with ‘poor business models’.

He said he will make an announcement later with Ofgem on how they will address the situation. Bigger energy suppliers are expected to get support to take on customers left adrift by collapses.

Meanwhile, Boris Johnson told reporters at the UN in New York that the government is ‘working very hard to find a way through’ but the chaos demonstrated the need to move to ‘clean, green sources of energy’. He compared the economic recovery after Covid to a ‘big thaw’ when pipes had been frozen. 

‘That’s when you have the problems and the leaks and all the difficulties, that’s really what’s happening to the global economy,’ the PM said.

‘It’s thawing very rapidly and you are seeing problems in the supply chains, very strong demand for gas around the world is producing this phenomenon but we’re going to fix it.’

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 be paying around £850-a-year for their energy because of the deals on offer in 2019 and 2020.

But they could immediately face a hike to £1,277 from October 1 due to the planned energy cap rise and may be paying as much as £1,500 by next April when they are moved to a new provider.

There are concerns that millions more people could be in the same situation after energy consultants Baringa predicted that the number of UK energy companies could fall from 49 to 10 in the next 12 months if wholesale prices remain the same. 

Experts have said that many of the companies that have gone bust brought in customers on ‘dirt cheap’ fixed deals on the back of low prices last year – but now have no hope of making any money so either folded or are seeking a Government bailout.

Ofgem will automatically move customers of Hub Energy, PfP, MoneyPlus, Utility Point, People’s Energy to a new supplier in the coming days with British Gas taking 350,000 of them today and EDF 220,000 last week. 

But energy market rules demand that customers whose supplier goes bust must be offered a fair deal by the new supplier – not the same one they had – meaning they are likely to pay significantly more. They will bring whatever credit they have on their accounts to a new provider, however.

Those affected can shop around for a new deal if they are unhappy with their new provider, but last year most energy firms were offering deals at £750 to £850-a-year – today there are now scarcely any deals under £1,200-a-year.

Stacey Stothard was one of 220,000 customer at Dorset-based Utility Point, which has gone bust. She believes her bill will now go up by up to £300 or more.

She told the BBC: ‘It is just like watching the meter go up and up. I did the right thing – not going for the cheapest deal, but choosing a company with a decent customer service record. I tried to protect myself from this turbulence. Now I’ve just had to order a lot of logs for the burner.’

Many people will be forced to make the devastating choice between heating and eating as energy bills rise, consumer champion Martin Lewis has warned. 

It came as Boris Johnson’s No 10 spokesman refused three times to rule out the energy bills price cap being removed or lifted this winter. 

It is already rising by £139 to stop average standard variable tariff bills going above £1,277 from October 1, but energy experts have said the wholesale price rises mean the cap may have to be raised a further £280 in the new year. 

The outspoken boss of Octopus Energy, Greg Jackson, one of the ten companies expected to survive, has said that ‘idiot companies’ who offered customers rock bottom prices without allowing for rises in global prices ‘don’t deserve’ to survive.

He added: ‘Make no mistake – there are real issues in energy caused by global gas and shortfalls in UK nukes – but the idea of ‘crisis’ is being pumped up by the former Big 6 in order to try to bounce govt and regulators into restoring the cosy oligopoly they used to enjoy’. 

Experts have said that Britain’s energy regulator must take responsibility for the crisis because their decision to open up the market to break up the Big 6’s control of the market has led to too many companies entering the market.

There were just ten in 2006 but this reached 70 in 2018 and is at 49 today, but this could be back at ten again in a year.   

Scott Byrom, Chief Executive Officer of TheEnergyShop.com said: ‘The reality is that Ofgem relaxed the requirements for new market entrants and I don’t believe that they have looked as carefully as they should have at the financial and organisational set up of some of these energy companies as well as their hedging strategies’, adding that he believes the rise of prices has meant that often poorly run businesses have gone bust. 

Chris Burke, chief operating officer at Colorado Energy, said the firm – which has 15,000 customers – faced difficulties if wholesale prices remained high.

He told BBC Radio 4’s World at One: ‘It’s pretty tricky for the entire industry, as probably everyone is aware. The price movements we are seeing in the market are, frankly, unprecedented.

‘Anyone who runs a small shop can understand, if the beans you were selling yesterday were 20p and now they are 80p a can – and you can’t change the price to the customer – it’s going to cause you problems.’

Asked if Colorado could survive, he said: ‘At this point in time, we don’t know, to be blunt.’ 

Mr Kwarteng insisted there is no danger of the ‘lights going out’ today amid fresh fears over gas shortages – with taxpayers facing spiking bills and costs to cover for stricken energy firms.

The Business Secretary hit back at ‘alarmism’ amid mounting concerns about the consequences of soaring wholesale gas prices – up 250 per cent since January and 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. 

Mr Kwarteng said he will make an announcement later with Ofgem on how they will address the situation. Bigger energy suppliers are expected to get support to take on customers left adrift by collapses.

‘The current global situation may see more suppliers than usual exiting the market but this is not something that should be any cause for alarm or panic,’ Mr Kwarteng said.

‘The Government will not be bailing out failed companies. There will be no rewards for failure or mismanagement.

‘The taxpayer should not be expected to prop up companies which have poor business models and are not resilient to fluctuations in price.’

He went on: ‘While we are not complacent we do not expect supply emergencies, this is a very important point. This is not a question of security of supply.

‘The Great British UK gas system has delivered securely to date and is expected to continue to function effectively with a diverse range of supply sources and sufficient delivery capacity to more than meet the demand.’

Mr Kwarteng said: ‘We have sufficient capacity, and more than sufficient capacity, to meet demand and we do not expect supply emergencies to occur this winter

‘There is absolutely no question of the lights going out or people being unable to heat their homes. There will be no three-day working weeks or a throwback to the 1970s.

‘Such thinking is alarmist, unhelpful and completely misguided.’

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

The Government is preparing to take over the running of small suppliers on the verge of collapse due to the crisis, which has seen wholesale gas prices increase by 70 per cent in a month. Bulb, an energy provider to 1.7million customers, is reportedly seeking a bailout.

It is exploring raising funds from investors or a potential joint venture or merger with another company, according to the Financial Times. A Bulb spokesman said: ‘From time to time we explore various opportunities to fund our business plans and further our mission to lower bills and lower CO2.’

Last night there were growing fears of gaps on supermarket shelves as ministers failed to achieve a breakthrough in talks over shortages of carbon dioxide. 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. 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 were last night drawing up possible options to incentivise the firm to restart production ahead of further talks in the coming days.

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

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.

E.on 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. 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 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.’

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: ‘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 CF boss Mr Will had explored possible ways forward to secure vital supplies.

Ministers were warned that they must act to keep the ‘lights turned on’ today amid fresh crisis talks over gas shortages – with taxpayers facing pumping billions of pounds into 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, 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. 

And 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.

The founder of MoneySavingExpert.com warned that some people who have previously fixed into cheap energy deals may see their bills surge by as much as 40% when they come off them.

Martin Lewis said: ‘The situation is catastrophic, in a way we have never seen before.’

Regulator Ofgem regularly sets an energy price cap, which acts as a ‘backstop’ protection for customers on default tariffs and takes into account the underlying costs to supply energy.

From October 1 the price cap will increase to £1,277.

Mr Lewis said it should be remembered that the price cap is based on typical use, so those who use more energy pay more.

He said the cap was based on prices in the run-up to August.

Mr Lewis continued: ‘Prices have exploded since then, again. So the price cap will change in six months.’

Mr Lewis suggested that, based on the ‘current run-rate’, the price cap from April 1 may potentially be as much as over £1,500 a year, based on typical usage.

He continued: ‘As I never thought I would say, one option is prices have gone up so much the price cap is now not a bad deal for the next six months and you get six months of protection.

‘But you could bide your time and cross your fingers and wait and just go onto the price cap when your current deal finishes… because it cannot go up until April 1.

‘The second option is to try and lock into a one or two-year fixed rate.

‘Now, there are still a couple of tariffs out there where you can lock in for a year or two years at below what the price cap will be on October 1.

‘They offer protection if things do not get better.

‘Everybody needs to understand you will be paying more for your energy.

‘This is not a question of saving money, this is a question of reducing the rise.’

Mr Lewis stressed that households need to make sure that they are able to see the options available across the whole of the market when comparing energy deals.

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.’ 

Last night there were 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’. 

 

The NEW Winter of Discontent: How Russian-inflated gas prices, two fertiliser plants closing, shortage of HGV drivers and an energy network ‘not fit for purpose’ has created ‘perfect storm’ to cripple UK

Rising natural gas prices, an energy network ‘not fit for purpose’ and a shortage of lorry drivers are creating a ‘perfect storm’ to cripple the UK, experts warned today.

The price of wholesale gas has surged by 250% since the beginning of the year and added 70% just since August as demand increases while the economy opens up, according to figures from Oil & Gas UK.

Amid fears of soaring domestic bills and a ‘three-day working week’, five small energy suppliers have already gone bust, and there are warnings more will follow unless taxpayers stump up billions.

A cocktail of other factors are also at play, including gas supplies drying up from Russia, high demand in Asia, wind turbines not spinning due to still weather conditions and North Sea platforms closing for maintenance that was paused during the pandemic.

Natural gas is required to produce fertiliser, with carbon dioxide as a bi-product. The UK relies on just two foreign-owned fertiliser plants for 60% of its CO2 production – both of which have shut because they cannot break even.

This has in turn hit a food production sector already suffering from a shortage of HGV drivers. It needs CO2 for a wide range of uses including refrigeration, carbonating beer and fizzy drinks and preserving meat.

The gas is also used to stun animals before slaughter. Many abattoirs will not switch to other methods either due to animal welfare concerns or because their equipment is only set up to work with CO2, industry sources told MailOnline.

Any animals not stunned will be culled instead and their meat wasted, two bodies representing poultry and pig producers warned today.

Meanwhile, medics use carbon dioxide during surgery to enlarge and stabilise body cavities, risking the nightmare scenario of some procedures having to be delayed by an NHS that is already struggling to process a huge Covid backlog.

Carbon dioxide could be scrubbed from the air in a process known as carbon capture, but scientists say the infrastructure to produce enough of the element through this method is not in place because it is so expensive.

Today, Iceland boss Richard Walker, expressed his horror that Britain was so reliant on just two fertiliser plants to supply the majority of a substance that is critical to the nation’s wellbeing.

He told BBC Radio 4: ‘What shocked me is that 60% of CO2 production is in two factories that are actually owned by a foreign business who have shut down because of gas prices.

‘This is critical to national security, not just food but also healthcare, and it’s quite perplexing that it’s at the whim of a private enterprise as to whether it’s profitable or not.

‘The government needs to prioritise CO2 to get these factories up and running to limit disruption to food supplies’.

Warning that a crisis is looming, he said: ‘In isolation this is a serious issue but it is compounded by the HGV driver shortage as well. All of this comes as we are working towards Christmas.

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

He said the CO2 shortage will hit meat products, baked good and chilled products such as salad as well as cans of fizzy drinks and bottled beers. 

CRISIS 1: GAS PRICES SPIKE

– Energy firms go bust 

– Risk of ‘3-day week’  

Business Secretary Kwasi Kwarteng is holding a fresh round of crisis talks with the energy industry today amid fears more small suppliers could go to the wall.

But while industry leaders said more needed to be done, Foreign Office minister James Cleverly would not confirm which measures could be taken.

Mr Kwarteng previously said consumers would be protected from sudden price hikes through the Government’s energy price cap.

However that puts pressure on the suppliers – particularly smaller companies – who are unable to pass on the increases in wholesale gas prices to their customers.

Four firms have already folded and there are fears that more could follow.

Some analysts have reportedly predicted that the UK’s energy companies could be reduced to three-quarters over the coming months leaving as few as 10.

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

Today, Peter McGirr, chief executive of small energy firm Green, said ‘the outlook is looking bleak’.

Mr McGirr told the BBC’s Today programme: ‘It is not that I have a bad business model or I have a bad business.

‘We just don’t have as deep pockets to keep going through this crisis. I think that all suppliers are feeling the pinch of this but some of them just have a lot deeper pockets to try and ride out the storm.’

He said: ‘I feel that without any support mechanism being put in place by Government, it’s unlikely we will see the winter through.’

Jonathan Maxwell, CEO and Founder of Sustainable Development Capital LLP, said the crisis was being caused by a ‘number of unconnected issues occurring at once. 

He told MailOnline: ‘The issues include high natural gas prices – the result of a number of factors including winter supply concerns, a storm in the US shutting down a gas supply terminal in Texas, disruption to the UK’s main power cable from France and historic lows in windspeed.

‘This is the latest in a long line of energy disruptions in the UK and provides further evidence that the current energy system is no longer fit for purpose. 

‘A fundamental change is required to ensure a cheaper, cleaner and more reliable energy future that meets the UK’s objectives for COP26.’

Mr Maxwell suggested the centralised nature of the National Grid had exacerbated the problems. 

‘The solutions are relatively simple – reduce energy wastage by generating cheaper, cleaner and more reliable power and heat closer to the point of use, improve energy efficiency, energy storage and backup solutions and enable smarter use of renewable energy sources, which will all reduce the reliance on natural gas.  

‘This serves to reduce the significant generation, transmission and distribution losses associated with a centralised grid, saving money and reducing the carbon intensity associated with large energy-users.’ 

Today, Mr Cleverly said he was ‘not going to speculate’ over whether the Government would step in.

The rise in gas prices has been blamed on a number of factors, including a cold winter which left stocks depleted, high demand for liquefied natural gas from Asia and a reduction in supplies from Russia.

Lower solar and wind output is another factor driving up prices. The UK and Europe has phased out coal plants in recent years, while less windy weather in recent weeks has lowered their contribution to the grid, driving up gas demand. 

Mr Cleverly said the shortage was due to the pandemic, and told Good Morning Britain: ‘Because the global economy is kind of waking up from this hiatus imposed upon us by Covid, we’re suddenly seeing a surge in demand and therefore surging gas prices that has affected all kinds of parts of the economy, it has had an impact on food production and we are looking to ensure that we protect those food suppliers.’

However Emma Pinchbeck, head of Energy UK, a trade association for the energy industry, told Times Radio the issue could not be blamed on one factor.

Speaking to broadcasters on the tarmac of New York’s JFK airport overnight, Prime Minister Boris Johnson said: ‘I think people should be reassured in the sense that yes there are a lot of short-term problems not just in our country, the UK, but around the world caused by gas supplies and shortages of all kinds.

‘This is really a function of the world economy waking up after Covid.

‘We’ve got to try and fix it as fast as we can, make sure we have the supplies we want, make sure we don’t allow the companies we rely on to go under. We’ll have to do everything we can.

‘But this will get better as the market starts to sort itself out, as the world economy gets back on its feet.’

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.  

At the same time ministers are grappling with warnings of potential shortages on the shelves as the knock-on effect of the gas price rise ripples through the economy. 

British Gas has agreed to take on an extra 350,000 domestic customers from collapsed energy firm People’s Energy, regulator Ofgem confirmed today. 

The company went bust last week, leading to Ofgem finding another supplier to take on the firm’s customers.

Outstanding credit balances including money owed to both existing and former domestic customers of People’s Energy will also be honoured.   

CRISIS 2: C02 PRODUCTION PLUMMETS

– Meat production could stop

– Culled animals will be binned

– Surgical procedures at risk 

Producers have warned that supplies of meat, poultry and fizzy drinks could all be hit due to a shortage of carbon dioxide (CO2).

It follows the shutting down of two large fertiliser plants in Teesside and Cheshire – which produce CO2 as a by-product – with the American owners citing the increase in gas prices. 

Scientists Peter Styring and Katy Armstrong, from the University of Sheffield, has said carbon capture could be used to supply the industry but it would be incredibly costly – not least because the technology is in a relatively early stage of development. 

‘It is possible to take CO2 from the atmosphere using a process known as direct air capture,’ they wrote in an article for the Conversation. 

‘There are a number of companies across the world, including one in Switzerland and another in Canada, that can already carry out this process. In theory, it could turn a problem into a valuable resource, particularly in developing countries with little other natural wealth.

‘The problem is the cost. While the amount of CO₂ in the air is damaging the climate, relatively speaking there are so few CO₂ molecules in the air that sucking them out is very expensive. ‘  

On Sunday, Mr Kwarteng met with Tony Will, the global chief executive of CF Industries, the UK’s biggest supplier of CO2 and the owner of the two fertiliser plants.

He said they had discussed the pressures the business was facing and ‘explored possible ways forward to secure vital supplies, including to our food and energy industries’.

Today, meat processing firm Cranswick warned it may have to half production. 

Carbon dioxide is needed to stun animals. It is also injected into meat products to prolong their shelf life. 

The British Poultry Association and the British Pig Association have both warned that animals that cannot be stunned and then slaughtered may need to be culled instead.  

Shockingly, this would mean that the animals are disposed of because processors do not send culled meat to retailers. 

Asked why other methods beyond CO2 could not be used, a meat industry source told MailOnline: ‘It’s all to do with animal welfare. 

‘Even within the C02 market it’s a certain grade of CO2 that’s used. It’s about making sure that the most humane methods are used.’ 

A second source said many abattoirs also did not have the equipment to carry out alternative culling methods. 

CO2 is also used to keep food at low temperatures. 

Online grocer Ocado said it has been forced to cancel frozen food deliveries due to shortages. 

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

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

Mr Cleverly said: ‘We’ll continue working with the sector to ensure that there is food on the table and gas in the pipes and that will remain a priority for Government.’

Health bosses have warned that NHS operations face being cancelled due to the CO2 shortage.  

Lord Adebowale, chairman of the NHS Confederation, yesterday urged ministers to ensure the NHS is prioritised for supplies.

He told Times Radio: ‘What I am concerned about – and I think [Business Secretary] Kwasi Kwarteng and others will be focused on this – is making sure there’s enough CO2 for the NHS.

‘CO2 is used in a number of interventions in the NHS – invasive surgery and endoscopy for instance. Stabilising body cavities so that surgeons can see what’s going on inside.

‘So we have to prioritise the NHS in all this because otherwise people will suffer.

‘But what it does really show is how interconnected it all is and we have to look at things systematically. It’s not just one thing, it’s a number of things.’

The NHS Confederation represents the healthcare system in England, Wales and Northern Ireland. 

CRISIS 3: LORRY DRIVER SHORTAGE

–  Gaps on shelves continue

The problems above are being exacerbated by the well-documented shortage of lorry drivers, which has created gaps on supermarket shelves.  

Britain is currently facing its own 100,000 shortfall of HGV drivers, which retail bosses have partly blamed on changes to migration rules post-Brexit and EU employees returning home.

The Road Haulage Association said the total number of people in the UK with HGV licences this summer is 516,000. 

But the latest Department for Transport data shows 278,700 HGV drivers were employed in 2020, equivalent to 54 per cent of the total.

They put the shortage largely down to Brexit and the pandemic, which led to 14,000 European drivers going home and just 600 of those returning.

Since last year, the industry has also seen large numbers of drivers retiring, while lockdown has hit the training of new drivers with 40,000 HGV driver tests cancelled.

The average age of a UK lorry driver is put at 56 to 57 and not enough young people have joined the industry due to its long hours, unattractive conditions and poor pay.

Drivers’ median hourly pay has risen 10 per cent since 2015 to £11.80 – below the 16 per cent average across other sectors, with new tax changes also not in their favour.

Lorry drivers can only drive for nine hours each day, but many are away from home up to 15 hours a day – putting off many young people who do not want such hours.

Last week, Tesco drivers and warehouse workers at four distribution centres rejected the offer of a 2.5% pay increase. 

If members vote for strike action then the supermarket giant could see empty shelves this winter which could potentially affect the Christmas period. 

Unite said its members voted against a 2.5 per cent offer, arguing it was lower than the RPI rate of inflation so represented a real-terms pay cut. 

 

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.