U.K. plans to offer emergency state backed loans to energy companies to keep them afloat
The United Kingdom (U.K.) is planning to offer emergency state-backed loans to energy companies to help them remain afloat amidst surging gas prices.
The Business Secretary of U.K. – Kwasi Kwarteng is holding crisis talks with the industry leaders today. Smaller suppliers face ruin as price hikes have made their price promises to customers undeliverable.
The U.K.’s sixth largest energy company, Bulb, is seeking a bailout, while four smaller firms are expected to go bust. Increased demand, particularly from countries in Asia which also experienced cold weather, has added to the pressure on prices.
Taking it to twitter Kwarteng tweeted,
Unfortunately, small energy suppliers are facing pressures due to sudden increases in global gas prices. Four small suppliers have ceased to trade in recent weeks.
— Kwasi Kwarteng (@KwasiKwarteng) September 19, 2021
If a supplier fails, Ofgem will ensure customers’ gas and electricity supply will continue uninterrupted (2/7)
He also tweeted,
Our priority is to protect consumers.
— Kwasi Kwarteng (@KwasiKwarteng) September 19, 2021
If a Supplier of Last Resort is not possible, a special administrator would be appointed by Ofgem and the Govt.
The objective is to continue supply to customers until the company can be rescued or customers moved to new suppliers (3/7)
Four small energy companies have ceased trading in recent weeks, including Edinburgh-based People’s Energy, which supplied gas and electricity to about 350,000 homes and 1,000 businesses, and Dorset-based Utility Point which had 220,000 customers. At the beginning of 2021, there were 70 energy suppliers in the U.K. However, the industry sources have said that by the end of 2021, there will only be 10 companies left.
Industry group Oil & Gas U.K. has said wholesale prices for gas had increased by 250% since January 2021, with a 70% rise since August 2021.
Kwarteng assured that Ofgem, the independent energy regulator of U.K. will ensure that energy supplies are not interrupted. Customers will continue to receive gas or electricity even if the energy supplier goes bust. Ofgem will move their account to a new supplier. The new supplier will then contact the consumer to explain what is happening with their account.
The Energy Price Cap is in place to protect millions of customers from the sudden increases in global gas prices. Initiatives like Warm Home Discount, Winter Fuel Payments and Cold Weather Payments are in place to make things smooth.
Meanwhile, the Prime Minister of U.K. – Boris Johnson, who is in New York for a United Nations (U.N.) N General Assembly meeting, said the problem was temporary and is very confident that U.K.’s supply chains and market forces will resolve the matter.
