Kwarteng said he would make a joint announcement with Britain’s energy regulator later in the day on the government’s plans to address the crisis. 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.
Kwasi Kwarteng also assured lawmakers that the government wouldn’t bail out failing energy suppliers as a result of the growing crisis. He earlier said that the government is prepared to appoint a special administrator for failed suppliers to ensure gas and electricity keeps flowing until their customers can be moved to new suppliers. “There is absolutely no question of the lights going out or people being unable to heat their homes,″ Kwarteng told the House of Commons. “There will be no three-day working weeks or a throwback to the 1970s. Such thinking is alarmist, unhelpful and completely misguided.” Kwarteng stressed that Britain’s diverse gas supply means it has more than enough to meet the nation’s energy needs, unlike some European countries that rely on a single source. The U.K. gets half its gas supplies from domestic production, 30% from Norway, and the rest from European pipelines and liquefied natural gas delivered by ship.
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Still, supporting the energy industry through the current troubles 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. Prime Minister Boris Johnson put the problems at the door of an economic recovery that he likened to “the big thaw” after a frost had frozen the pipes. “That’s when you have the problems and the leaks and all the difficulties, that’s really what’s happening to the global economy,” he told reporters in New York at the U.N. General Assembly. “It’s thawing very rapidly and you are seeing problems in the supply chains, very strong demand for gas around the world is producing this phenomenon. But we’re going to fix it.”
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.
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