Energy companies could receive emergency loans from the government as struggling firms battle to stay afloat amid a surge in wholesale gas prices in the UK.
Prime Minister Boris Johnson said “we’ll have to do everything we can” to prevent those companies from failing - with smaller suppliers facing potential ruin as price hikes mean they cannot fulfill their promises to customers.
Why gas prices are surging
OGUK, representing the offshore oil and gas industry, reported wholesale prices for gas have surged 250% since January – with a 70% rise since August alone.
The rise in gas prices has been blamed on a number of factors, including a cold winter which left stocks depleted, high demand for liquefied natural gas from Asia and a reduction in supplies from Russia.
Following a meeting on Sunday with the regulator Ofgem, Mr Kwarteng said “well-rehearsed plans” were in place to ensure consumers were not cut off in the event of further failures.
However, he is expected on Monday to come under pressure from the big suppliers for a major Government support package to help them through the crisis.
The Financial Times reported the industry wants the creation of a so-called “bad bank” to absorb unprofitable customers from firms that fail.
What the PM said
Boris Johnson said: “I think people should be reassured in the sense that yes there are a lot of short-term problems not just in our country, the UK, but around the world caused by gas supplies and shortages of all kinds.
“This is really a function of the world economy waking up after Covid.
“We’ve got to try and fix it as fast as we can, make sure we have the supplies we want, make sure we don’t allow the companies we rely on to go under. We’ll have to do everything we can.
“But this will get better as the market starts to sort itself out, as the world economy gets back on its feet.”
He added: “It’s like everybody going back to put the kettle on at the end of a TV programme, you’re seeing huge stresses on the world supply systems.”
‘Worrying time’ for customers
Following a weekend locked in emergency talks, Mr Kwarteng acknowledged it was a “worrying time” for customers, but said he was confident supplies could be maintained.
He said consumers would be protected from sudden price hikes through the Government’s energy price cap.
However that puts pressure on the suppliers – particularly smaller companies – who are unable to pass on the increases in wholesale gas prices to their customers.
Four firms have already folded and there are fears that more could follow.
A version of this article originally appeared on NationalWorld.com