Energy price cap will remain, energy firms and government agree in crisis talks

An engineer inspects the Feeder Station at Sellinge, Kent, which provides power to the 25,000 volt overhead cables on the new Channel Tunnel Rail Link 07/02/03 - the first sections were switched on over the 46 miles (74kms) of new railway between Fawkham Junction, near Swanley, *..and the Channel Tunnel complex at Cheriton. When complete in 2007, the 5.2 billion CTRL will halve journey times from central London to the Channel Tunnel. Soon Eurostar trains will start tesing the line at speeds of up to 186 mph. 22/07/2004 Millions of people on low incomes could save money on their gas and electricity by changing the way they pay, according to a report today. The National Audit Office found customers who use a pre-payment meter for both gas and electricity could save around 63 a year if they paid by monthly direct debit instead. The report said, however, that most people with the meters were unaware they were paying more than other customers. Ofgem, the regulator for the gas and electricity market, has pledged to step up efforts to raise awareness of the savings on offer. Chris Young/PA
Energy companies and the government have agreed that the energy price cap must remain in place Credit: Chris Young/PA

The energy price cap will remain in place this winter, the government has promised, despite the wholesale cost of gas rocketing by 250% since January, including a 70% rise since August.

Business Secretary Kwasi Kwarteng has resisted pressure from struggling energy firms to lift the price cap, with many smaller providers desperate for help to shoulder the burden of record high gas prices.

He also announced to the Commons that ministers would not be bailing out energy firms after a meeting with the industry.

“Central to any next steps is our clear and agreed position that the energy price cap will remain in place,” Mr Kwarteng and Ofgem chief executive Jonathan Brearley said in a statement issued late on Monday.

Mr Kwarteng had earlier told MPs the cap saves 15 million households up to £100 a year and said: “It’s not going anywhere".



It comes as the Daily Telegraph reported some companies at the meeting - attended by firms including Scottish Power, Octopus, E.ON and EDF – called for the cap to be scrapped.

With four energy firms already gone bust, there are fears more firms could collapse. Some analysts reportedly predicted the number of energy companies in the UK could drop to as few as 10.

The energy price cap is already set to rise after a review in August.

From October 1, those on default tariffs paying by direct debit face an increase of £139, rising from £1,138 to £1,277, according to Ofgem.

And prepayment customers face a higher increase of £153, taking their annual bill from £1,156 to £1,309.

Business Secretary Kwasi Kwarteng has submitted proposals for state loans to the Treasury Credit: Victoria Jones/PA

Wholesale gas prices have increased 250% since January. Since August, they have risen by 70%.

Addressing MPs, Cabinet minister Mr Kwarteng said there needed to be an acceptance gas prices “could be high for longer than people anticipate”.

But he said fears of a three-day working week are “alarmist”.

He added: “There is absolutely no question of the lights going out or people being unable to heat their homes.”

Energy suppliers are understood to be talking to the government about backing loans or a “bad bank” style solution to a potential collapse in dozens of energy companies.

Why has there been a rise in gas prices?

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.

In addition, cables that import electricity from France were recently damaged in a fire at Sellindge in Kent.

It saw half the site's capacity taken out, while the other half was unavailable due to a planned outage. National Grid extended the planned outage from September 25 to October 23.

And September has not been a very windy month, meaning more gas is needed to produce electricity.