Govt will protect consumers, minister tells parliament
After three days of meetings with retail suppliers, major energy consumers and the energy regulator Ofgem, business minister Kwasi Kwarteng told parliament September 20 that protecting consumers was the government's "primary focus – and will shape our entire approach to this important issue." Meetings continue across government today and throughout the course of this week, he said. A joint statement with Ofgem is expected.
Britain benefits from a diverse range of gas supply sources and there is no chance of blackouts, he said. "We have sufficient capacity and more than sufficient capacity to meet demand, and we do not expect supply emergencies to occur this winter," he said. Nevertheless, "while we are not complacent, we do not expect supply emergencies this winter. This is a very important point. This is not a question of security of supply," he said.
But he could not say at what price that gas, which is climbing daily, would be secured. Several major consumers have turned down output, while four energy retailers have failed, owing to a failure to hedge and the regulatory price cap limiting their ability to raise prices. More failures are expected in the near future, he said but, to put in context, he said it was usual for suppliers to exit the market at this time of the year and "is not something that should be cause for alarm or panic."
The price cap was ridiculed by the ruling Conservative government when Labour party leader Ed Miliband proposed the idea. But it was adapted under the Theresa May government and Kwarteng said it "isn't going anywhere."
He said neither the gas nor the power grid were at risk of failing to meet demand and "domestic production is still our largest single gas supply source, and accounted for about 50% of total supply last year."
He said Norway, which delivers nearly 30% of Britain's gas supply, would supply more gas from October 1 to support UK and European demand.
He said the government will not be bailing out failed companies, even though the cost of failure, which is borne by the surviving retailers, will trickle down to consumers through their bills:
"There will be no rewards for failure or mismanagement. The taxpayer should not be expected to prop-up companies who have poor business models and are not resilient to fluctuations in price. Secondly, customers, especially and most particularly vulnerable customers, must be protected from price spikes," he said.
"It is absolutely vital that the energy supply sector remains a liberalised competitive market in order to deliver value and good service to consumers," he said.
He also said the Civil Service and government were working to ensure that there is also minimal disruption from the shortage of CO2 a consequence of some industrial turn-downs. "To maintain our domestic supplies of CO2, we are in constant contact with relevant companies who produce and supply CO2 and we are monitoring the situation minute by minute," he said.
"UK too reliant on fossil fuels"
But he said also that if the UK were less dependent on fossil fuels, the situation would be better. "Our exposure to volatile global gas prices underscores the importance of our plan to build a strong, home-grown renewable energy sector to strengthen our energy security into the future." he said.
"Thanks to the steps that we have made as a government, renewable energy has quadrupled in terms of gigawatts capacity since 2010, far more than quadrupled in fact – but there is clearly a lot more we can do in this area," he said. But the poor performance of wind turbines this year was not touched on, although part of the reason for high gas prices is the demand from the power sector.
Kwarteng said the government is "committed to approve at least one large-scale new nuclear project in the next few years," and backing the next generation of advanced nuclear technology to attract billions of pounds in private capital and create tens of thousands of jobs.