Wholesale gas prices have more than quadrupled this year and have risen by more than 70 percent since August alone
Economy Minister Kwasi Kwarteng has tabled proposals to the Treasury Department calling for hundreds of millions of pounds to bail out energy companies suffering from soaring gas prices.
Wholesale gas prices have more than quadrupled this year and have risen by more than 70 percent since August alone.
The economics minister’s request has sparked tension with Chancellor Rishi Sunak, although Prime Minister Boris Johnson appears to be backing the bailout.
Mr Kwarteng is calling for cash subsidies for industries such as steel, glass, ceramics and paper, all of which are badly affected by the gas price hike.
The simple reason is that demand is rising again as the economy recovers from the pandemic while supply dries up.
A cold winter last year left stocks in Europe unusually low, while Russian pipeline gas deliveries were also lower than expected.
Asia also suffered from a cold winter and is competing for imports of liquefied natural gas.
Increased demand has pushed prices up not just in the UK, but across Europe and Asia.
The rise in gas prices has already caused a number of smaller energy companies to go out of business, including Avro, Green, Igloo, Utility Point, People’s Energy, PfP Energy and MoneyPlus Energy.
The Treasury Department has yet to decide whether to accept Mr. Kwarteng’s request for rescue funds.
“We will do what is in the best interests of both consumers and taxpayers,” said a Treasury Department spokesman.
The economics minister’s formal request for funds came after a public dispute between the two departments in which Finance Ministry sources accused Mr. Kwarteng of “making things up” in interviews.
The outbreak came after Mr Kwarteng said during Sunday’s broadcast round that he was in talks with Mr Sunak about a support package to help companies hardest hit by the skyrocketing wholesale gas price the Treasury Department was denying at the time.
British Glass CEO Dave Dalton told Times Radio that up to a quarter of the 120,000 employees in the industry and its supply chains could lose their jobs without additional help.
Mr Dalton said the package would have to run into the “billions” if it is to have any hope of sustaining critical sectors like its run.
“My industry alone, which is a small fraction of the total energy-intensive sector, is seeing a £ 300 million increase in bills. So if it’s not billions, across the range of sectors, you know what will bring us through that surge? ”He said.
The energy price cap – the maximum amount that energy companies are allowed to charge households at standard tariffs – is to remain in place through the winter, the government said.
However, it is likely that it will go up when Ofgem’s next review, which could result in household energy bills increasing by more than £ 400 a year.
According to one of the UK’s leading economic forecasters, Samuel Tombs, the average household’s dual-fuel energy bill on a standard tariff is expected to increase by about 33 percent, or £ 421, to £ 1,698 a year from next April.
This increase in energy bills would come on top of the £ 139 per year cap increase introduced after the last Ofgem review this month
Gas still generates around 40 percent of UK electricity, which means the price of electricity is now more than five times higher than it was a year ago.
A spokesman for the Ministry of Corporate, Energy and Industrial Strategy said: “The Secretary of Commerce has been in regular contact with Ofgem and has partnered with major and minor energy providers to understand the challenges they are currently facing and to explore ways to to ensure that we protect consumers in the best possible way. “
“The energy price cap remains in place to protect millions of customers from sudden increases in global gas prices. When suppliers stop trading, we have a clear, well-established process to ensure that customers are protected and that delivery is not interrupted. “