UK Gov't Stands Firm on Household Price Cap Amid Energy Market Jitters

Rampant speculation on the energy market has seen the price of natural gas futures more than double in recent weeks — before crashing back after Russia pledged to honour all existing contracts via its network of pipelines. But entrepreneurs in Britain's oversaturated market fear their profit margins will be cut to the bone.

The UK's business minister has insisted the household energy price cap will remain in place despite yo-yoing energy market prices and pressure from industry.

Business, Energy, and Industrial Strategy Secretary Kwasi Kwarteng told Sky News' Trevor Phillips on Sunday morning that the current price control limit, set by regulator Ofgem in August, would stay in force for the full six-month term from 1 October of this year to 1 April 2022.

"Many companies during this period have said that we should lift the price cap or get rid of it", Kwarteng said. "And I've been very clear that it can't be moved because it does offer consumers the protection that we all need against very, very high upswings in the price".

'The price cap is the biggest shield for consumers, and it will not be moved.'

When pressed whether he can guarantee uninterrupted energy supply this winter, Business Secretary @KwasiKwarteng says he is "as certain as I can be".#Phillips: https://t.co/7FArLWBlRL pic.twitter.com/u5EmSEHiC8

— Trevor Phillips on Sunday (@RidgeOnSunday) October 10, 2021

The cabinet minister also resisted Phillips' goading suggestion that the government was advising the public to wrap up warm and turn the thermostat down.

"I'm not going down that route. I think people are perfectly sensible users of energy", Kwarteng said. "All I am guaranteeing, or attempting to guarantee, is security of supply".

Are you telling people to wear another woolly jumper?@KwasiKwarteng says people should "do what they feel comfortable with", adding his job is "not to say how many layers of clothing people should wear" to stay warm over winter.#Phillips: https://t.co/7FArLWBlRL pic.twitter.com/PXH0feXL8o

— Trevor Phillips on Sunday (@RidgeOnSunday) October 10, 2021

Kwarteng explained that 50 percent of the UK's gas supply in 2020 was domestically-produced, 30 percent came from Norway — whose energy minister told him a fortnight earlier the country was increasing gas output — and 20 percent from liquified natural gas (LNG) imports from around the world.

Phillips is a former member of the London Assembly for the opposition Labour Party, and was on the board of the Britain Stronger in Europe campaign against Brexit — which Tory Prime Minister Boris Johnson delivered.

Business Concerns

Kwarteng also stressed that while the price cap would not be extended to business users, they've already benefited from existing subsidies.

"We've already got subsidies in place and it's very clear that a lot of those are working", he said. "On the consumer side we've got an energy price cap and on the industry side we have measures where we support industries, heavy electricity users".

"We've already given businesses lots of support in terms of electricity pricing."@KwasiKwarteng says he has not asked the Treasury for subsidies for industry, adding he "can't promise anything as yet" but doesn't rule out an energy price cap.#Phillips: https://t.co/7FArLWBlRL pic.twitter.com/MhGPf0veq6

— Trevor Phillips on Sunday (@RidgeOnSunday) October 10, 2021

"I'm speaking to government colleagues, particularly in the Treasury, to try and see a way through this", Kwarteng added.

But an unnamed source at the Treasury denied the business secretary had approached the department.

"This is not the first time the BEIS secretary has made things up in interviews", the source told Sky News. "To be crystal clear the Treasury are not involved in any talks".

Industry group Energy UK chief executive Emma Pinchbeck warned that more "fragile" intermediary household supply companies could go bankrupt over the winter — and claimed that would mean price rises for consumers.

Energy UK chief executive Emma Pinchbeck tells @TrevorPTweets that she "honestly doesn't know" how many suppliers will go bust this winter but is "expecting more companies to fail", and that will mean more costs for customers.#Phillips: https://t.co/7FArLWBlRL pic.twitter.com/5vLwUBH6bg

— Trevor Phillips on Sunday (@RidgeOnSunday) October 10, 2021

Britain's privatised energy market has scores of companies competing to act as intermediaries between the generating and supply monopolies and consumers, reading meters and billing users.

The actual supply infrastructure is run by regional Distribution Network Operator (DNO) organisations, currently controlled by just seven companies, while generation is in the hands of other firms — including the French state-owned national power utility EDF.

Market Mayhem

Prices on the gas futures market have more than doubled in recent weeks — amid speculation following unusually cold winter and spring weather across Europe earlier this year and a recent period of calm winds that hit electricity turbine generation — causing severl energy billing companies to go bankrupt.

But Russian President Vladimir Putin's announcement on Wednesday that national gas company Gazprom would honour all supply contracts burst the market bubble — with the pending start of operations from the new Nord Stream 2 pipeline across the Baltic Sea set to increase flow further.

Ironically, the prime minister and his Downing Street spokesman made statements this week claiming Nord Stream 2 would actually harm "energy security" by making Eastern European countries more reliant on Russia.

A total of 10 smaller billing firms have gone bust since August as speculation on the gas futures market has seen wholesale prices double in weeks. The largest of those was Avro Energy, which had 580,000 customers before filing for insolvency in September.

Opposition Response

Labour Shadow Energy Minister Jonathan Reynolds took the opportunity to lay into the ruling Conservatives, insisting the crisis was "directly down to government policy". But he said his party would not nationalise the sector if it were in government, claiming to even suggest so would be "a distraction from the poor government choices that have been made".

.@TrevorPTweets asks @jreynoldsMP how Labour would have handled the energy crisis if they were in power.

The shadow minister describes the mistakes he believes Boris Johnson's govt has made, saying they have "made things worse for people".#Phillips: https://t.co/7FArLWBlRL pic.twitter.com/jPc2bHOTHx

— Trevor Phillips on Sunday (@RidgeOnSunday) October 10, 2021

Shadow work and pensions secretary @jreynoldsMP says Labour would not nationalise the energy industry, saying the energy crisis is "down to government policy and poor decision making".#Phillips: https://t.co/7FArLWBlRL pic.twitter.com/dPx06CfnvT

— Trevor Phillips on Sunday (@RidgeOnSunday) October 10, 2021

Liberal Democrat leader Sir Ed Davey called for the energy bill discount to elderly to be tripled.

Lib Dem leader @EdwardJDavey tells @TrevorPTweets the business secretary has failed to "engage" with the energy crisis, adding he would triple the Warm Homes Discount and extend it to more households.#Phillips: https://t.co/7FArLWBlRL pic.twitter.com/BquzJQhSOI

— Trevor Phillips on Sunday (@RidgeOnSunday) October 10, 2021