Peston rings alarm bell on ‘another serious market failure’ – could crush living standards

Cleverly on ‘protecting integrity of supply’ amid gas price spike

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Business Secretary Kwasi Kwarteng said the Government wants energy firms to “stay afloat organically” during crisis talks with the energy industry and its regulator Ofgem. His comments came after company bosses warned the outlook was “looking bleak” and the growing energy crisis. Wholesale prices for gas have soared 250 percent since January this year, with 70 percent of the rise just from August alone.

UK energy company Bulb was also reported to be hoping for a bailout to help keep it afloat while wholesale gas prices continued to rise

However, ITV News’ political editor Mr Peston argued a bailout could be “politically disastrous” for Prime Minister Boris Johnson that could backfire.

He wrote on Twitter: “I cannot see how even cheap Government loans are remotely going to fix this problem of crashing energy companies.

“Because the fundamental problem is that energy customers are MASSIVELY loss making for energy suppliers that haven’t hedged their gas supply commitments.

“That’s true for those businesses failing now and any big company that might take on those stranded customers.

“So why would big companies ride to the rescue? I can’t see it. Unless Government were to legislate to allow the price cap next spring to rise way beyond even the current doubling in market prices, such that today’s losses were offset by tomorrow’s super profits.

“But that would crush living standards and be politically disastrous for the Tories.

“So one way or another this government is going to end up pumping billions of pounds of subsidies – our money – into the energy supply industry.

“It is yet another serious market failure. And yet another chance for Boris Johnson to redefine the Tories as the party of huge public spending and market intervention. What strange times.”

A Bulb spokesperson said: “From time to time we explore various opportunities to fund our business plans and further our mission to lower bills and lower CO2.

“Like everyone in the industry, we’re monitoring wholesale prices and their impact on our business.”

Ofgem also announced that British Gas is set to take on 350,000 customers from People’s Energy, which is one of two smaller suppliers which collapsed last week, in a bid to help the struggling industry.

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Mr Kwarteng previously said consumers would be protected from sudden price rises through the Government’s energy price cap, before confirming this would stay in place.

But that has sparked backlash for putting pressure on the suppliers, particularly smaller companies, who are unable to pass on the increases in wholesale gas prices to their customers.

He has now said ministers were “looking at options to protect consumers”.

He wrote on twitter following the talks today: “In any scenario, we will ensure UK consumers have continuity of supply – through a supplier of last resort or a special administrator if needed.”

Foreign Office minister James Cleverly also said he was “not going to speculate” over whether the Government would step in.

When asked whether he was therefore not ruling out the Government bailing out firms, he added: “We are considering a range of options.”

But he added the Government wanted energy firms to “stay afloat organically”.

When asked whether the Government would consider scrapping green levies to bring down bills, a spokesman for No 10 said they were an important part of reducing carbon emissions.

He said: “I can’t pre-empt the outcome of the business roundtable which Kwasi Kwarteng is chairing now.”

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