Britain’s business secretary will hold emergency talks with industry leaders and consumer groups Monday as the U.K. government looks for ways to support energy companies threatened by soaring natural gas prices.
Kwasi Kwarteng said late Sunday that Britain’s energy regulator would ensure gas and electricity keeps flowing to customers if their energy supplier fails. If necessary, the government will appoint a special administrator to ensure supplies until a company can be rescued or its customers moved to new suppliers, he said.
Four small energy companies have failed in recent weeks because of the sudden increase in gas prices worldwide. Wholesale gas prices in Britain have tripled this year as the global economic recovery from the COVID-19 pandemic increases demand at the same time storms in the U.S. and planned maintenance have crimped supplies.
U.K. authorities stress that Britain’s domestic gas production coupled with imports from Norway mean there are ample supplies to meet the nation’s energy needs.
“Energy security will always be our absolute priority,” Kwarteng tweeted Sunday. “I am confident security of supply can be maintained under a wide range of scenarios.”
The Times of London reported that the cost of supporting the industry may ultimately cost taxpayers billions of pounds.
One option proposed by some large energy firms is to move the customers of failed suppliers into a temporary government-owned company that could be sold at a later date, British media reported. This proposal would be similar to the so-called bad banks that were used to house the high-risk assets of some lenders during the global financial crisis.
Another option is for the government to provide loan guarantees to large energy suppliers to absorb the customers of failed companies. The costs of such a program would ultimately be recovered through higher energy bills.
“This is really a function of the world economy waking up after COVID,” Prime Minister Boris Johnson said as he arrived in New York on Sunday. ”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.”
U.K. consumers are already feeling the pinch, with price comparison websites reporting heavy volume as people search 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 in August approved a 12% price increase for customers without such contracts.
Peter Smith, director of policy and advocacy at fuel poverty charity National Energy Action, said the spike in energy prices couldn’t come at a worse time for consumers who are already struggling with the economic impact of the pandemic.
Overall consumer prices rose at the fastest pace on record in the year through August, pushing the inflation rate to 4.1%, the Office for National Statistics said last week.
Before the pandemic, about 13% of households in England and 25% in Scotland were classified as experiencing fuel poverty, defined as spending a high proportion of household income to keep their homes at a reasonable temperature.
“Millions of people across the U.K. are already at breaking point and experiencing the desperate consequences of not being able to heat their homes,″ Smith said. “The U.K. government and energy regulator need to urgently address the toxic impact this is going to have on physical and mental health across the U.K. this winter.″