Kwarteng to hold emergency meeting with gas chiefs on price crisis

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Kwasi Kwarteng, the business secretary, will hold an emergency summit with gas industry chiefs on Monday morning in a bid to contain the fallout caused by soaring market prices on consumers and businesses.

Mid-tier providers will be placed under administration if they run into problems this winter in a bid to protect consumers from higher bills, he revealed on Sunday, after spending a hectic weekend grappling with eventualities. of the impending gas crisis in Great Britain.

Kwarteng said small businesses would be allowed to go bankrupt with their customers auctioned off to the company willing to offer them the cheapest rate.

It is hoped the meeting will contain the fallout caused by rising market prices, which has led to a frantic weekend of meetings and phone calls, culminating in the Minister drawing up plans to deal with future insolvencies. of more than 60 gas suppliers.

It comes as the President of the NHS Confederation has warned that the lack of carbon dioxide resulting from the crisis could cause operations to be canceled – exacerbating the huge backlog in health services.

CO reduction2 the supply could also impact the food industry, with meat, poultry, beer and soft drinks all requiring gas for a variety of purposes.

Five small energy companies have gone bankrupt in the past five weeks, often because they failed to hedge against rising market prices, leaving more than half a million customers in need of a new supplier . Industry sources expect four more to drop before the end of the month, leaving an additional 1 million customers stranded.

It emerged on Sunday evening that Bulb, the UK’s sixth-largest energy company with 1.7 million customers, was seeking a bailout in order to stay afloat.

Possible options include raising funds from investors and merging or forming a joint venture with another provider, according to the Financial Times, which first reported the story.

A Bulb spokesperson told The Guardian: “From time to time we explore various opportunities to fund our business plans and continue our mission of reducing bills and CO emissions.2. Like everyone in the industry, we monitor wholesale prices and their impact on our business.

Government sources said that a particular concern was how to react if a “mid-size” supplier – whose size is not defined – failed. But Kwarteng confirmed that “a special administrator would be appointed” by the regulator Ofgem and the government, to ensure the continuity of the gas supply.

The industry roundtable, which is expected to include major suppliers as well as Ofgem, will review the plans and specifically discuss “the impact on small suppliers and consumers,” according to a Whitehall source.

As part of his preparations, Kwarteng said he met Jonathan Brearley, chief executive of Ofgem, on Sunday morning. He “assured me of well-established plans in place to protect the market and consumers,” the minister said.

The minister also had a series of one-on-one crisis talks with executives of the UK’s biggest energy companies over the weekend, which were compared by a high-profile industry source to the meetings. emergency held with businesses at the start of Covid-19. pandemic.

Wholesale gas prices have hit all-time highs in recent weeks due to a combination of a faster-than-expected global recovery from the pandemic, depleted stocks after a cold winter and a shortage of gasoline. wind power, a consequence of the UK’s less windy summer since 1961.

Ministers do not want to bail out struggling suppliers and are happy to let small energy suppliers go bankrupt. A senior industry source said the government was “not interested in bailing out poorly run businesses” and may let the industry experience a “natural response” to the ongoing crisis.

Boris Johnson has claimed that the surge in gas prices is a symptom of the rebound in the global economy from Covid which will be “easily taken over” by market forces.

“I want to give general assurance that the problems we are seeing are temporary,” he said. “We are experiencing bottlenecks in all kinds of things – huge stresses – as the world wakes up from Covid. It’s like everyone turns on the kettle at the end of a TV show.

“I have no doubt that the supply issues will be easily resolved. We are very confident in our supply chains. But in the meantime, we’ll make sure to work with all the gas companies to do everything we can to ensure that people are supplied, to make sure they don’t go bankrupt, and to make sure we get through the current tough times. . ”

By the end of winter, the industry could shrink to just 10 energy suppliers, according to expert analysis at Baringa Partners, down from around 70 at the start of the year.

Rising wholesale prices are already affecting the industry. Britain’s biggest fertilizer and CO last week2 producer, CF Fertilizers, halted production due to high natural gas prices. CO2 is a by-product of fertilizer manufacturing, and the company supplies 60% of the UK market.

Operations at NHS hospitals risk being canceled, Lord Adebowale, chairman of the NHS Confederation, has warned.

“What concerns me, and I think Kwasi Kwarteng and others are going to focus, is to make sure there is enough CO2 for the NHS, ”Adebowale told Times Radio.

“Because the CO2 is used in a number of procedures in the NHS – invasive surgery, endoscopy, for example, stabilizing body cavities so surgeons can see what’s going on inside.

A senior health services source said the NHS over the weekend received assurances from the government that its access to the UK’s supply of CO2 would not be affected.

Meat and poultry processors have warned slaughterhouses may have to go out of business within the next fortnight because they are dependent on CO2 for the humane slaughter of animals.

Nick Allen, Managing Director of the British Meat Processors Association, said: “Most of our members have a CO stock of a few weeks.2, depending on the time of delivery. In the poultry sector, some factories are already exhausted. What surprised us was how quickly CF Fertilizers closed its doors.

On Sunday, Kwarteng met with Tony Will, the CEO of US parent company CF Fertilizers, but the meeting was interrupted without the minister convincing the company to restart production, which she said is unprofitable at times. current gas prices.

Sources from the business department said the minister “is now working on government-wide options” and will meet with the company again next week. In addition to trying to find a way to restart production, the government will try to source CO2 Besides.

gas supplies throughout europe

Britain is one of the most vulnerable countries in Europe to gas supply disruptions due to its heavy reliance on gas for heating and power plants. It also has some of the most limited gas storage capacities in Europe since the closure in 2017 of the Rough gas storage site off the east coast.

In the past, the UK was able to draw gas directly from the vast national reserves in the North Sea. But the UK now only supplies around half of its own gas, of which around 30% comes from Norway via a pipeline and 22% is shipped via Qatari tankers.

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