The UK government says the lights will remain on despite higher energy prices
London Britain’s business minister said on Monday there was no danger that people would not be able to heat their homes this winter after rising natural gas prices forced him to hold emergency talks with energy suppliers and consumer groups.
Kwasi Quarting also assured lawmakers that the government would not bail out failed energy suppliers as a result of the growing crisis. He said earlier that the government is ready to appoint a special official for failed suppliers to ensure the continued flow of gas and electricity so that their customers can be transferred to new suppliers.
Kwarteng told the House of Commons: “There is no question that the lights are out or that people cannot heat their homes.” There will be no three-day work weeks or a return to the 1970s. Such thinking is worrisome, unhelpful, and completely misleading.”
Quarting said he would make a joint announcement with Britain’s energy regulator later in the day on the government’s plans to tackle the crisis.
Four small energy companies have failed in recent weeks due to the sudden rise in gas prices globally. Wholesale gas prices in Britain have tripled this year as the global economic recovery from the COVID-19 pandemic spurs demand at the same time as storms in the US and planned maintenance hamper supplies.
Quarting stressed that Britain’s diversity of gas supplies means it has more than enough to meet the country’s energy needs, unlike some European countries that rely on a single source. The UK gets half of its gas supplies from domestic production, 30% from Norway, and the rest from European pipelines and ship-delivered LNG.
However, supporting the energy industry during the current turmoil could ultimately cost taxpayers billions of pounds.
British media reported that one of the options proposed by some major energy companies is to transfer customers of failed suppliers to a temporary government-owned company that can be sold at a later time. This proposal would be similar to the so-called bad banks that were used to house the risky assets of some lenders during the global financial crisis.
Another option is for the government to offer loan guarantees to major energy suppliers to accommodate failed corporate clients. The costs of such a program will eventually be recovered through higher energy bills.
Prime Minister Boris Johnson has put problems at the door of an economic recovery, which he likened to the “great thaw” after frost froze pipes.
“That’s when you have the problems and the leaks and all the hardships, that’s what really happens to the global economy,” he told reporters in New York at the United Nations General Assembly. “It is melting very quickly and you are seeing problems in the supply chains, and very strong demand for gas around the world is producing this phenomenon. But we will fix it.”
UK consumers are already feeling the pinch, with price comparison sites reporting a significant volume as people look for increasingly rare opportunities to lock in prices with long-term contracts. Gas and electricity costs for many people are set to jump next month after regulators agreed in August to raise prices by 12% for customers without such contracts.
Peter Smith, director of policy and advocacy at the fuel poverty charity National Energy Action, said the rise in energy prices could not come at a worse time for consumers already grappling with the economic impact of the pandemic.
The Office for National Statistics said last week that overall consumer prices rose at the fastest pace ever in the year to August, pushing the inflation rate to 4.1%.
Before the pandemic, about 13% of households in England and 25% in Scotland were classified as having fuel poverty, which was defined as spending a high proportion of a household’s income to keep their homes at a reasonable temperature.
“Millions of people across the UK are on the verge of collapse and suffering the dire consequences of not being able to heat their homes,” Smith said. “The UK Government and Energy Regulatory Authority need to urgently address the toxic impact this is having on physical and mental health across the UK this winter.”
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