LONDON: UK energy companies are seeking a massive government bailout as a surge in gas and electricity prices threatens to push suppliers out of business.
The UK government is set for a third day of emergency talks with the industry on Monday after Business Secretary Kwasi Kwarteng said that small suppliers were under “pressure”.
Surging energy prices mean the usual system for dealing with failed suppliers may be insufficient to deal with the current crisis.
Normally if a company goes under, another supplier is found. But in the current market, that’s not a profitable proposition. There’s also concern that several could fail at once, according to a person familiar with the situation. That’s why large companies are proposing government help.
As gas prices have almost tripled because of a supply crunch, seven UK suppliers have already failed this year.
Unhedged companies have sold energy to customers at lower levels than they can now buy in the market, and regulated price caps mean they can’t pass on the cost to consumers - at least for now. But those caps will be revised early next year, potentially bringing inflation and fuel poverty to lower-income Britons already struggling as the economy emerges from the pandemic.
The power crisis is already spreading to the food industry - another potential source of inflation.
“The business secretary is in close contact with the energy industry on the impact of high global gas prices, having met senior figures today and yesterday, and will speak further on these issues at an industry roundtable planned for tomorrow,” a government spokesman said.
Across Europe, governments are taking steps to curb the impact of high prices on households. Italy is set to spend around 3.5 billion euros (S$5.5 billion) protecting consumers, while Spain, France and Greece are acting to stem the hit to their economies. As government talks continued in the UK, the country’s sixth biggest supplier, Bulb Energy, was in negotiations with Lazard Group about seeking new sources of financing, according to a person familiar with the discussions.
“From time to time, we explore various opportunities to fund our business plans,” Bulb said in a statement. “Like everyone in the industry, we’re monitoring wholesale prices and their impact on our business.”
Mr Kwarteng said that the regulator and government would make sure consumers weren’t hit by supply outages. “Ofgem has robust measures in place to ensure that customers do not need to worry, their needs are met, and their gas and electricity supply will continue uninterrupted if a supplier fails.”