Business Secretary Kwasi Kwarteng has rejected calls that the energy price cap must be scrapped or raised after the surge in gas costs this year.
UK gas prices jumped by a further 17% yesterday to a record high and have now risen by 80% since July and by more than 250% since the start of the year.
Energy companies raised the issue repeatedly in a crisis meeting with the Business Secretary and industry regulator Ofgem yesterday, according to reports.
In a joint statement, Kwarteng and regulator Ofgem’s chief executive Jonathan Brearley said: “Central to any next steps is our clear and agreed position that the energy price cap will remain in place.”
The cap is adjusted every six months and protects consumers from sudden movements in prices but means companies cannot pass them on and the result in this current crisis has been a string of small suppliers going bust.
The next price cap change is scheduled for 1 October, when the average annual bill goes up by GBP139 to GBP1,277.
Speaking to the BBC, Kwarteng said the government would not introduce a blanket bailout for suppliers in trouble due to the gas price rise but is considering a loan scheme for larger suppliers who have to absorb the cost of taking on customers from failed firms.
British Gas, owned by Centrica PLC (LSE:CNA), said yesterday it would take on the 350,000 domestic and 500 business customers of People’s Energy, which went under on 14 September.
Centrica was one of the suppliers at the meeting with Kwarteng alongside Shell, EDF, E.ON and Scottish Power with Ofgem, the National Grid and the Citizens Advice Bureau also present.
Ed Miliband, the Labour shadow business secretary, said the government was being “too complacent” about the situation, with industries such as fertiliser makers and CO2 also having to curb production due to energy costs.
Prices rise again
Prices rocketed again yesterday after Russia’s Gazprom decided not to increase supplies in an auction for October sparking another scramble for supplies.
Gazprom provides Europe with around 40% of its gas, while most of Britains imports come from the North Sea and Norway.
Suppliers said the decision by the Russians means prices are unlikely to come down in the near future, something that Kwarteng confirmed to MPs, saying “Prices could be high for longer than people anticipate”.
What is being described as a perfect storm for gas prices has been caused by cold weather in Europe increased demand from Asia and outages in Russia and elsewhere,
Commentators yesterday were suggesting that because of the situation the number of UK gas suppliers could drop from 55 at the start of the year to just 10.
“Small suppliers are still in serious if not terminal trouble,” said one expert.