Life-saving loans for energy companies encouraged in crisis talks

Woman checking thermostat

The government plans to offer state-guaranteed emergency loans to energy companies as companies struggle to stay afloat in the face of soaring gas prices.

Business Secretary Kwasi Kwarteng will hold crisis talks with business leaders on Monday, including Centrica and E.On.

Small suppliers are threatened with ruin, as price increases have made their price promises to customers unachievable.

The UK’s sixth-largest energy company, Bulb, is seeking a bailout, while four smaller companies are set to go bankrupt.

At the start of 2021, there were 70 energy providers in the UK, but industry sources said there might only be 10 left by the end of the year.

Four small energy companies have gone out of business in recent weeks, including Edinburgh-based People’s Energy, which supplied gas and electricity to around 350,000 homes and 1,000 businesses, and Dorset-based Utility Point, which had 220,000 customers.

Recent price increases have prevented some companies from supplying their customers with the energy they paid for.

Industry group Oil & Gas UK said wholesale gas prices had risen 250% since January – with a 70% increase since August.

In the event of a supplier default, the energy regulator Ofgem will ensure that affected households continue to be supplied and will not lose the money owed to them.

A new energy supplier would be responsible for taking over any credit balances a customer might have.

But the process of dealing with failing businesses has come under pressure as customer adoption is less attractive to surviving businesses due to soaring wholesale prices.

State-guaranteed loans can be offered to encourage companies to take on clients, although Foreign Secretary James Cleverly told BBC Breakfast on Monday that “ideally” companies should stay afloat “on their own. efforts”.

Supply issues

Prime Minister Boris Johnson, who is in New York for a United Nations General Assembly meeting, said the problem was “temporary”.

He said he was “very confident” in UK supply chains and that market forces would need to be “very, very quick” to resolve issues, but the government would help where it could. .

Wholesale gas prices

Wholesale gas prices

Increasing demand, especially from countries in Asia which also experienced the cold, added to the pressure on prices.

Nick Butler, visiting professor and president of the Policy Institute at King’s College London, told the BBC’s Today program that a reduction in supplies from the United States, Russia and the North Sea also played a role, as well as limited storage facilities for gas. UK.

“The government has looked away from the issue of energy security,” he said. “The whole focus in Whitehall has been on climate change. Right now we’re very dependent on oil and gas and when gas is lacking in the global market it comes back here.”

What to do if your energy supplier goes bankrupt

Gas hob

Gas hob

  • Customers will continue to receive gas or electricity even if the energy supplier goes bankrupt. Ofgem will move your account to a new provider but this may take a few weeks. Your new supplier should then contact you to explain what is going on with your account.

  • While waiting to hear from your new supplier: check your current balance and – if possible – download any invoices; take a picture of your meter reading

  • If you’re paying by direct debit, you don’t need to cancel it immediately, says Citizens Advice. Wait for your new account to be configured before canceling it

  • If you are in credit on your account, your money is protected and you will be refunded. If you were in debt to the old vendor, you will still have to repay the money. The new supplier should contact you to arrange a payment plan

  • Once you’ve been notified of your new supplier, make sure you have the best rate for you. You can change if you’re unhappy with your new provider or rate without any penalty, but don’t do so until the account has been transferred.

Source: Advice to citizens

A senior executive at one of the UK’s largest energy companies described an estimate that 10 energy companies would survive as “optimistic.”

The proliferation of new energy retailers, set up to challenge the bigger players, had been seen by governments past and present as the triumph of healthy competition.

The biggest energy suppliers have the financial resources to insure – or hedge – against the risk of soaring energy prices. Small players were unable or unwilling to spend money to guard against a price shock.

Industry sources told the BBC that insurance positions or “hedges” – the right to buy energy at historic fixed prices – taken out by the biggest players, are now worth as much or more than the big companies themselves.

Senior executives at some of the biggest companies have said that the energy price cap – backed by both Labor and Tory politicians – played a role in triggering the current crisis.

“You can legislate to protect the consumer – but it can bankrupt the supplier,” said a senior industry source.

“Price caps are now the cheapest offer on the market and providing energy to new customers at that price is in deficit.”

There have been calls to remove levies on customer energy bills to fund green initiatives. However, the BBC understands that these will be maintained as the sums involved would not significantly solve the scale of the current problem.

A reduction or removal would send “the wrong signal”, three months ahead of a landmark climate change conference, known as COP 26, which the UK is hosting in Glasgow in November.

The business secretary had intensive discussions with energy suppliers over the weekend and will chair an industry meeting on Monday to explore solutions to the crisis.

It is understood that Kwarteng is “reluctant” to bail out small businesses, but fears consumers will end up with higher tariffs when they switch to a new supplier.

The government also identifies sectors and businesses vulnerable to rising gas prices

Energy-intensive fertilizer producers have shut down, creating a shortage of a production by-product, carbon dioxide – widely used in the production and storage of food products.

Iceland Managing Director Richard Walker told the BBC on Monday that the carbon dioxide shortage should be a priority to limit any potential disruption to supplies to supermarkets, which are also affected due to a shortage of drivers from heavyweight.

BBC Around Reading Image Banner - Blue

BBC Around Reading Image Banner – Blue

Footer - Blue

Footer – Blue

Banner saying

Banner saying “Contact us”

How will you be affected by this? E-mail [email protected].

Please include a contact number if you would like to speak to a BBC reporter. You can also get in touch in the following ways:

If you are reading this page and do not see the form, you will need to visit the mobile version of the BBC website to submit your question or comment or you can email us at [email protected] . Please include your name, age and location with any submission.

Source link

About Wanda Dufresne

Check Also

Banks Still Finance Fossil Fuels – While Signing Net Zero Liabilities | Mariana Mazzucato

Ddespite stern warnings from the IPCC and the UN, it’s business as usual for fossil …

Leave a Reply

Your email address will not be published. Required fields are marked *