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Energy crisis: Factory production could come to halt as gas prices soar

Factories across the country could stop production due to rising energy costs, industry leaders have warned.

Representatives of energy intensive industries met with Business Secretary Kwasi Kwarteng on Friday to discuss the ongoing crisis.

It came amid reports that energy bills could go up even further for UK customers, with an additional charge being introduced.

The new strategy could commit the Government to cutting the price of electricity and imposing a levy on gas bills to fund low-carbon heating, according to The Times.

A series of consultations are expected to be released before going ahead with the plan, which is likely to start in 2023 and could add £170 a year to gas bills, the paper said.

During talks, leaders warned the Government of “production curtailments” that could be on the way as the winter crisis looms.

Dr Richard Leese, chair of the Energy Intensive Users Group (EIUG), said: “Our message to the Secretary of State was for prompt and preventative measures to help avoid recent production curtailments in the fertiliser and steel sectors being replicated in other areas this winter.

“EIUG will work with Government to avoid threats both to the production of essential domestic and industrial products, as well an enormous range of supply chains critical to our economy and levelling up the country.”

The EIUG’s membership comprises trade associations and customer groups representing industrial sectors with the heaviest energy consumption in the UK. They include UK Steel, the Chemical Industries Association, the Confederation of Paper Industries, the Mineral Products Association, the British Glass Manufacturers Federation, the British Ceramic Confederation, BOC, Air Products and the Major Energy Users Council.

However, the Government has said it remains “confident” in the security of gas supply in coming months.

In a statement, the Department for Business, Energy and Industrial Strategy said about the meeting: “The Business Secretary stressed that the Government remained confident in the security of gas supply this winter.

“He also highlighted the £2 billion package of support that has been made available to industry since 2013 to help reduce electricity costs.

“The Business Secretary noted he was determined to secure a competitive future for our energy-intensive industries and promised to continue to work closely with companies over the coming days to further understand and help mitigate the impacts of any cost increases faced by businesses.”

Shadow Business Secretary Ed Miliband argued that “this is a crisis made in Downing Street”.

He said: “Kwasi Kwarteng is scrambling to meet industry bosses but he is all talk. This chaotic Tory government got us into this mess in the first place and has no plan to address it.”

It comes as there have already been warnings that bills could rise by 30 per cent in 2022.

Research agency Cornwall Insight predicted that the potential collapse of even more suppliers could push the energy price cap to about £1,660 in summer – approximately a third higher than the record £1,277 price cap set for winter 2021-22, which commenced at the start of October.

Energy regulator Ofgem reviews the price cap once every six months, with it changing based on the cost that suppliers have to pay for their energy, cost of policies and operating costs, among other things.

Mr Kwarteng said consumers will be better insulated from erratic gas prices as wind and solar power start providing more energy to the UK’s households.

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Kwarteng seeks to calm energy chiefs, as Price Cap’s architect calls for its overhaul

Beleaguered energy secretary Kwasi Kwarteng won the support of Britain’s power bosses today, reassuring them that vulnerable consumers would be continue to be protected, as he warned that more suppliers are set to quit UK retailing.

Speaking at EnergyUK’s annual conference, the minister repeated his three principles to overcome Britain’s crisis, caused by spiralling wholesale costs of gas:

  • No government bail-outs for failed suppliers
  • Customers, particularly the most vulnerable, will have their supply safeguarded
  • The UK energy market must remain competitive

More under-financed retailers would quit the supply business in coming months, Kwarteng predicted, but he vowed ‘there must be no public payouts for bad management’.

He said Britain must continue to press ahead in deploying more generation from renewables. In the medium term it would protect consumers from what the minister called ‘exorbitant spikes’ in prices.

EnergyUK’s chief executive Emma Pinchbeck indicated to BBC Radio at lunchtime her acceptance that the minister was doing all he could to combat the crisis.

She asked only that D-BEIS continue to monitor gas wholesale markets closely, and Ofgem should institute reforms so that this ‘unprecedented crisis’ should not happen again.

Ofgem’s price cap as implemented last month is already predicted to inflict a £ 100 per year rise this winter on up to 15 million home account holders.  Business tariffs are not protected.  The cap’s revision next April, based around current wholesale prices, is feared to extract a further £400 million from consumers’ wallets in 2022.

In a dramatic intervention this afternoon, the price cap’s architect John Penrose MP called for its radical overhaul.

Penrose, appointed by premier Johnson as his government’s competition czar, and husband of track-and-trace boss Dido Harding, argued that energy markets needed a ‘circuit-breaker’, suspending trades in times of unusual volatility such as the present.

Delivering the prestigious Beesley Lecture to economists, Penrose would say:

“The energy price cap was supposed to wipe out the ‘loyalty penalty’, where loyal customers on default tariffs were quietly charged miles more than people who switched. But it isn’t working.

“Since the cap was introduced, the loyalty penalty has hardly changed at all, so millions of families are still being ripped off at the same time as prices are spiking and energy firms are going bust. We’ve got the worst of both worlds.

 “We should reform the cap so it stops loyal customers from being ripped off in the 99 months out of a hundred when the market is normal. But make sure it still protects us for the 1 month in a hundred when things aren’t normal, like now, when there’s an international price spike.

“The fix would be pretty simple. The Financial Conduct Authority is already introducing new rules to wipe out loyalty penalty ripoffs in insurance, by saying insurance firms can’t charge existing customers more than new ones. We should do the same for energy too.

“But Ofgem should still be able to fix a price cap on the – thankfully pretty rare – moments when there’s an international price spike too.  

“Lots of stock markets have an emergency circuit-breaker, where regulators intervene if prices suddenly rise or fall really fast, and we should have the same for energy. Ofgem would be able to intervene to protect customers with a new price cap when it was really needed, if the international price spiked by more than a pre-set amount and time.

“The reformed price cap wouldn’t just stop loyalty penalty ripoffs and protect families from price spikes. It would make energy firms healthier and more resilient too.

“They’d be able to hedge their risks when international prices spike, because the circuit-breaker would only be triggered if prices moved by more than the pre-set amount.

“Challenger firms would be financially stronger and healthier because they wouldn’t face unfair competition from big incumbents with lots of long-term clients who were being milked with loyalty penalties to subsidise new customers either”.

Not-for-profit promoters of clean power Regen earlier this week proposed their own structural reforms, this time to supply and generation.

An ambitious but easy doubling to 10GW of all the onshore renewables projects eligible to enter this December’s coming Contracts for Difference auctions would yield the opportunity quickly to hedge against rising power prices, and at no cost to tax- or bill-payers, the body argued in its letter to Kwarteng.

“CfDs are an excellent energy price hedge: in return for revenue certainty, generators pay back to the public purse when prices are high – directly reducing electricity bills, Regen said.  Annual CfD auctions were needed, Regen said.

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Fracking industry urges Government to look again at shale gas with UK energy prices set to surge

UK Onshore Oil and Gas said the looming crisis was a ‘bizarre state of affairs’ when gas beneath Northern England and the Midlands could ‘meet the UK’s gas demand for 50 years’

Campaigners are urging Boris Johnson to hold the Government’s line on fracking as the UK’s onshore oil and gas industry has called on ministers to look again at shale gas amid the looming energy crisis.

It comes amid warnings from trade union leaders that hundreds of thousands of jobs could be lost unless Downing Street takes urgent action to avoid a surge in gas prices next spring.

Boris Johnson announced a moratorium on hydraulic fracturing in England in 2019, with drilling already blocked in the rest of the UK, after a scientific report warned it was not possible to predict the magnitude of earthquaes it might trigger.

It came after operations were halted in Lancashire only months earlier when homes were shaken by the UK’s largest fracking tremor, with residents saying houses shook during a “deep, guttural roar”.

But Katherine Gray from UK Onshore Oil and Gas said the looming crisis was a “bizarre state of affairs” when gas beneath Northern England and the Midlands could “meet the UK’s gas demand for 50 years”.

She said: “Our current gas crisis should be the flashing neon prompting the Department for Business, Energy and Industrial Strategy needs to look at the science and come up with a workable plan to maximise our abundant domestic resource.”

Tony Bosworth, energy campaigner at Friends of the Earth, said: “Fracking was rightly halted two years ago because of concerns about safety and nothing has changed since then.

“The way out of the current gas crisis is not to produce more gas, but to insulate people’s homes and to increase deployment of renewable energy to reduce our reliance on expensive and polluting fossil fuels.”

A spokeswoman for Frack Free Lancashire said: “Science doesn’t change. Fracking is still as unacceptable as ever given the geological and environmental conditions in the UK.”

As the Government prepares to host the COP26 climate change summit next month, the Business Secretary Kwasi Kwarteng has already ruled out future fracking, saying it would disrupt too many communities.

The GMB union said the Government must urgently find a way of protecting manufacturing jobs from a surge in gas prices and ensure the UK manufactures can still meet their longer-term net zero targets.

A Government spokesperson said: “The issues we are facing are not a question of security of supply, but wholesale gas prices set by international markets. We maintain our position that fracking will not be allowed to proceed in England unless compelling new scientific evidence is provided.

“We are determined to secure a competitive future for our energy intensive industries such as manufacturing and construction, and in recent years have provided them with extensive support, including more than £2bn to help with the costs of energy and to protect jobs.”

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Water companies to pay for low customer satisfaction rankings

Thames Water and Southern Water has ranked at the bottom of the customer satisfaction and experience annual Ofwat rankings and as a result, will have to make underperformance payments.

That follows the water services regulation authority’s publication of the results of customer satisfaction and experience for water and wastewater companies in England and Wales over the last year.

According to these rankings, Thames Water has to return £16.6 million and Southern Water £4.9 million to its customers for poor customer satisfaction.

Surveys found Portsmouth Water, Wessex Water, Northumbrian Water and Dŵr Cymru as top performers when it comes to customer satisfaction.

The mechanism named C-MeX measures the quality of services delivered to household customers and is designed to incentivise the 17 largest water companies to provide excellent levels of service to their customers.

David Black, Ofwat Interim Chief Executive, said: “We recognise companies have had to overcome challenges over the last year and we are pleased to see some improvements in customer service levels.

“Customers expect their water provider to deliver good customer service and those who fail to meet those expectations need to raise their performance.

“We want companies to continually strive to improve the quality of their customer experience – those companies who are leading the sector have been rightly rewarded.”

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Energy suppliers demand government suspends £150 green taxes over the winter to slash soaring fuel bills amid huge rises in wholesale gas prices

Britain’s energy suppliers are urging the Government to suspend green taxes on energy bills over the winter to ease the financial pressure on households.

The taxes, most of which are added to electricity bills – increase bills by an average of £150 a year.

Intended to help fund the shift to lower-carbon heating in homes, they are now coinciding with huge rises in wholesale gas prices which could force up bills by as much as £800 a year.

Energy supplier Eon and renewable firms Octopus, Bulb and Ovo said a short-term solution to rocketing bills would be to suspend green taxes this winter.

The call came as Ministers pressed ahead with plans to shift some of the burden of the green taxes from electricity to gas bills.

The plans would cut the price of electricity over the next decade, while increasing gas bills by about £170 a year. Ministers want to move away from gas boilers and towards heat pumps, which suck in heat from the ground, water and air.

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The shift would hit lower-income families the hardest because gas heating comprises a more significant proportion of their outgoings, although if enacted it will not feed through to domestic bills until 2023 at the earliest.

Cabinet tensions are starting to rise over the issue of green levies ahead of the COP26 climate summit in Glasgow next month, with No 10 noting that Chancellor Rishi Sunak failed to mention the Government’s target of decarbonising the economy by 2050 in last week’s party conference speech.

The Chancellor was horrified by calculations from the independent Office For Budget Responsibility (OBR) putting the cost of making buildings net zero at £400 billion.

The OBR also war

Emma Young, of Bulb Energy, said: ‘The focus right now must be to protect consumers from high wholesale gas prices over the winter.

‘We could accelerate the transition from gas boilers to heat pumps by shifting environmental and policy costs from electricity bills to general taxation. That would help keep costs down on electricity bills and ensure the green transition is fair and affordable.’

Eon’s UK chief executive Michael Lewis called the Government’s plan to shift electricity taxes to gas bills ‘too simplistic and potentially regressive’. He said: ‘What about the immediate impact on those least able to switch away from gas in their homes, and least able to afford a sudden and significant increase in their heating bills?

‘The quickest and most significant thing we can do to help reduce fuel bills over winter is remove these costs from electricity bills and instead fund them through government expenditure.’

Octopus Energy, which supplies 3.1 million UK households after taking on 580,000 customers from bust supplier Avro Energy, has supported the plan in principle.

ned that the Government would need to impose carbon taxes to make up for the loss of fuel duty and other taxes.

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Struggling energy firm ‘moved customers to other suppliers without their consent’

Energy firm Omni Energy reportedly switched thousands of customers to suppliers, including Bulb and ScottishPower

Leeds-based energy firm Omni Energy has told customers it is “highly likely” it will exit the UK’s energy market before the end of November.

The small energy supplier has reportedly sent an email to nearly 10,000 customers saying: “The UK industry is in crisis. The cost of wholesale energy is continuing to rise and without a significant change in the wholesale cost of energy, or a government intervention, it is highly likely Omni Energy will cease trading before the end of November.

“Why are we telling you this now? Despite reports in the media that only ‘badly run’ energy companies are ceasing to trade, we consider ourselves a well-run energy supplier. (…) At the moment, with wholesale energy costs at record highs, the cost of purchasing the energy we supply to your home is simply more than we can charge you which will quickly become unsustainable for our business.”

The company added: “To support you and make sure we minimise the impact to you we recommend that you switch to another supplier as soon as possible.”

Several customers of the company took to Twitter to raise concerns about the move.

ELN has contacted Omni Energy for a response.

In recent weeks, nine energy companies collapsed following gas price hikes.

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Rescuing abandoned customers ‘costs leading energy firms £700’

Taking on customers whose energy company has collapsed will cost surviving gas and electricity firms approximately £700 more per new client.

Market giants such as British Gas, Octopus, and Shell have gained hundreds of thousands of retail customers from Ofgem’s supplier of last resort process – but it comes at a cost.

The price of ‘onboarding’ new consumers from defunct suppliers – known as ‘orphans’ – is estimated to be £700 more than the regulator’s £1,277 price cap based on average usage.

With Ofgem only reviewing its price cap on a twice per year basis, energy companies are set to bear the brunt of record wholesale prices and the limits on what customers can be charged this winter.

This follows the collapse of suppliers in the energy sector earlier this year, which has affected 1.5 million customers. In 2018, prior to the decline in energy suppliers, there were over 70 competitors in the market vying for consumers, after competitive reforms to the market that successfully reduced the influence of the former ‘Big Six’.

Simone Rossi, chief executive of EDF Energy, told the Financial Times that his company is currently is losing money with the acquisition of each new consumer.

He said: “Right now we actually suffering a loss… It’s a huge, huge issue for us across the industry.”

It is possible the biggest players in the sector could return to a dominant position in the market following the instability at smaller energy firms, provided they can ride the wave of on-boarding costs.

However, Laith Khalaf, head of investment analysis at AJ Bell, told CityAM that it will be difficult for energy suppliers to see the opportunity provided by new customers due to the current situation regarding costs.

He said: “It’s clearly hard for energy suppliers to view new customers positively when they are potentially going to cost them so much money as a result of the price cap. Longer term they may be able to turn a profit, but margins are actually pretty thin in energy supply, so it takes a long time to repair an onboarding loss.”

Commenting on possible resolutions, he added: “The price cap is clearly there to protect customers, but there’s only so long the energy suppliers can soak up costs before they have to pass them on, and any review of the price cap will take into account the increased cost of wholesale prices. The best case scenario is that energy prices fall back and make things more affordable, otherwise households are inevitably going to end up paying more.”