The British government is considering proposing emergency loans to energy companies, some of which are in serious financial trouble due to rising commodity prices. Kwasi Kwarteng, business secretary, is scheduled to speak to industry representatives on Monday, reports the BBC.
Behind the sharp rise in wholesale gas prices is high demand and limited supply. In the UK, consumers are protected from sudden increases thanks to a government cap – the maximum price for energy. However, this means that energy companies are not able to pass on the higher wholesale costs to their customers. In some cases, this forces companies to go out of business. The sixth-largest energy company in the UK – Bulb – is looking for a rescue, and four smaller companies are likely to go bankrupt in the coming days, the BBC reads.
Aid for energy suppliers in the UK
As the portal adds, it seems that Kwarteng will be “reluctant” to save smaller companies. However, he is convinced that new suppliers may impose more expensive tariffs on customers – in the event of taking over operators who will go bankrupt. The new supplier agrees prices with the Ofgem energy regulator, but they may be higher than the previous offer, explains the BBC.
It adds that millions of households in England, Wales and Scotland are facing a 12 percent increase in energy bills since October when the higher price cap goes into effect – the maximum price that suppliers can charge customers under a standard payment plan.
Operators cannot withstand the price pressure
There were 70 energy suppliers in the UK at the beginning of 2021, but according to industry sources, there may be as few as 10 by the end of the year, the BBC warns. In recent weeks, he points out that four small energy companies, including Edinburgh-based People’s Energy, which supplied gas and electricity to around 350,000 homes and 1,000 businesses, have shut down. In addition, Dorset-based Utility Point, which had 220,000 customers, PfP Energy and MoneyPlus also stopped trading in September.
As the portal explains, due to recent price increases, some companies are unable to provide their customers with energy. If the supplier fails – Ofgem will ensure the continued supply of raw material to households.
Last weekend, the business secretary held talks with energy suppliers and Ofgem, and on Monday he is organizing another meeting to investigate solutions to the crisis, the BBC reports.
He adds that food producers and supermarkets are also experiencing problems – the crisis has an impact on the supply of carbon dioxide. It is used to stunning animals prior to slaughter and in the form of dry ice to help keep food fresh during storage and transport.
Gas price increases – why is the raw material so expensive?
Analyst from the Energetyka24.pl portal Jakub Wiech on TVN24 mentioned the reasons for the increases. – This is the aftermath of what we have on the European and world markets when it comes to the supply of blue fuel. In fact, the entire world recovering from this economic slowdown during the lockdown, the pandemic began to rapidly increase its gas consumption, while the supply side, i.e. the companies producing this fuel, did not keep up with this jump. This was followed by Russia’s political actions, which limited the supply of gas to Europe, he said.
Among the reasons, the expert also mentioned “limited supply of energy from renewable sources”. – In the North Sea, where there are very large capacities installed in wind farms, we have a complete fleet and there is no electricity produced from offshore windmills, which prompted countries with capacity in this technology to compensate for losses by gas power plants. All these factors have caused gas prices to rise to really record levels in Europe and it is felt by Polish consumers – he said.
As for Poland, the President of the Energy Regulatory Office approved on Thursday changes in the tariff of PGNiG Obrót Detaliczny in the area of gas fuel trading. The increase in the price of gas fuel in relation to the currently applicable tariff for all tariff groups is 7.4%. The changed tariff will apply from October 1 to December 31, 2021.
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