Government will not bail out failing energy firms, says minister
A surge in wholesale gas prices has led to the collapse of several small providers in recent weeks and there are concerns more suppliers could fold.
However, Kwasi Kwarteng told MPs: “The government will not be bailing out failed companies. There will be no rewards for failure or mismanagement. The taxpayer should not be expected to prop up companies which have poor business models and are not resilient to fluctuations in price.”
Instead, the business secretary confirmed the government was considering offering bigger energy firms state-backed loans for taking on the customers of collapsed smaller suppliers.
Speaking to Sky News, Kwarteng said: “It costs a company to absorb up to hundreds of thousands of customers from another company that’s failed, that costs money, and there may well be a provision for some sort of loan and that’s been discussed.”
Four small energy firms have ceased trading in the past fortnight, leaving more than half a million customers in need of a new supplier.
Yesterday, the business security and regulator Ofgem held crisis talks with energy suppliers including E.ON, EDF and Scottish Power.
A joint statement from Kwarteng and Ofgem chief executive Jonathan Brearley following the meeting, said: “The recent increase in wholesale global gas prices continues to be a cause of concern for consumers, businesses and energy suppliers across the UK.
“We want to be clear that this is not an issue of supply – the United Kingdom benefits from having a diverse range of gas supply sources with capacity that can more than meet demand.
“In the event an energy supplier fails, we are committed that consumers face the least amount of disruption possible – and there are clear and well-established processes in place to ensuring this is the case.
“In the coming days, we will also meet with smaller and challenger energy suppliers and set out the next steps for protecting consumers, businesses and energy suppliers from these global prices rises.”
They also confirmed the energy price cap will remain in place.
The cap protects customers on variable tariffs from spikes in wholesale gas prices by limiting the rates a supplier can charge for units of electricity and gas.
The cap will go up by £139 to £1,277 from 1 October.