Britain’s Prime Minister Boris Johnson has said the government will “do everything we can” to prevent energy companies going bust because of rising wholesale gas prices.
Ministers are being urged to step in and bail out energy companies after Oguk, representing the offshore oil and gas industry, reported a price surge of 250 per cent since January – with a 70 per cent increase on last month alone.
The Financial Times reported on Monday that Business Secretary Kwasi Kwarteng had been warned by industry leaders that out of 55 companies in the sector, only six to 10 are on track to still be operating by the end of 2021.
It comes after the UK’s biggest poultry supplier said traditional Christmas dinners could be cancelled due to a shortage of carbon dioxide (CO2), used to slaughter turkeys.
Foreign Office minister James Cleverly was on Monday pressed on the matter during an interview with Sky News but declined to say whether the government would offer bailouts.
“We will ensure the protection of consumers safe from the price inflations that we’re seeing all over the world but also we’re very, very conscious of the importance of protecting that energy supply as well,” he said.
Later on Monday, Mr Kwarteng will meet industry leaders for crisis talks to discuss possible solutions to ease the rising costs, which have been blamed on factors including a cold winter which left stocks depleted, high demand for liquefied natural gas from Asia and a reduction in supplies from Russia.
Dale Vince, owner of Ecotricity which specialises in green power, said his company was hit by a triple whammy – the lowest wind speed in 60 years, a fire on one of the company’s interconnectors and a global shortage of gas.
“The energy market is in crisis anyway, small suppliers have been going bankrupt at the rate of one every six weeks for the last two years anyway,” he told BBC Radio 4’s Today programme.
He said energy groups are finding themselves “jammed between a rock and a hard place” and needed urgent help from the government.
The gas price cap imposed by Ofgem, the government regulator for electricity and downstream natural gas markets, which stipulates how much they can charge for energy, has tied the hands of many businesses, he said.
Mr Vince warned that any company that is not “hedged now going into the winter is in really big trouble and either the government are going to bail them out or they’re going to take the price cap away or actually do something more fundamental”.
Speaking to broadcasters on the tarmac of New York’s JFK airport, the prime minister pledged to offer support to the ailing industry to prevent businesses from going under.
“I think people should be reassured in the sense that, yes, there are a lot of short-term problems not just in our country, the UK, but around the world caused by gas supplies and shortages of all kinds," he said before his appearance at the United Nations General Assembly.
“This is really a function of the world economy waking up after Covid. 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.
“But this will get better as the market starts to sort itself out, as the world economy gets back on its feet.”
The closure of the Rough plant off the Yorkshire coast saw the UK’s gas storage slashed to 1.7 per cent of annual demand and the costly task of storage has been subcontracted to Germany and the Netherlands.
Clive Moffatt, a gas consultant and former adviser to the government on energy security, said the closure was a dangerous move.
He told The Daily Telegraph the UK was now in “extremely vulnerable” territory and predicted “prices could go through the roof”.
“You can’t rely on the interconnectors. Contracts can be rescinded and suppliers can declare force majeure: end of story," he said. "The EU made this very clear during the negotiations over Brexit.
“We could easily see a three-day working week. The government has been playing dangerous games with the grid and has allowed a situation to develop that is outside their control. It’s terribly depressing.”
After a meeting on Sunday with the regulator Ofgem, Mr Kwarteng said “well-rehearsed plans” were in place to ensure consumers were not cut off in the event of power failures.
But he is expected on Monday to come under pressure from the big suppliers for a major government support package to help them through the crisis.
Bulb, the UK's sixth largest energy group, is seeking a cash boost to stay afloat and is holding talks with the investment bank Lazard.
"From time to time we explore various opportunities to fund our business plans and further our mission to lower bills and lower CO2," a representative for Bulb told The National. "Like everyone in the industry, we're monitoring wholesale prices and their impact on our business."
Meanwhile, a sharp rise in gas prices has led to the closure of two large fertiliser plants in Teesside and Cheshire – which produce CO2 as a by-product – cutting supply to the food industry.
Ranjit Singh Boparan, owner of Bernard Matthews and 2 Sisters Food Group, says this, combined with a shortage of workers, will affect the supply of turkeys for Christmas.
“The CO2 issue is a massive body blow and puts us at breaking point, it really does – that’s poultry, beef, pork, as well as the wider food industry,” he said.