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Rising energy costs should be tackled by the Government “right now” amid fears over a difficult winter, an industry leader has said.
The Energy Intensive Users Group (EIUG) chair Dr Richard Leese said he put forward three “technical” proposals to the Government to avoid interruption to supply chains.
It comes after he attended a meeting with Business Secretary Kwasi Kwarteng and other representatives of energy intensive industries to discuss the wholesale gas crisis on Friday afternoon.
Dr Leese told BBC Breakfast on Saturday morning: “All across the energy intensive industries, they’re equally affected. We’ve seen the curtailment in production in the steel and fertiliser sector – that’s had a knock-on impact into the supply chains in the industrial supply chains and domestic supply chains.
“What we’ve done is lay out to Government a winter package of measures that we think is needed to prevent those interruptions in supply chains occurring again.
“It’s needed absolutely right now – gas prices are at an unprecedented level and the businesses that manufacture the goods that we need are trying to operate under these unprecedented conditions.
“The measures that we laid out in front of the Secretary of State yesterday will go some way to alleviating the pain this winter and we really need action for this winter.”
The EIUG said it “welcomed” the opportunity to meet with Mr Kwarteng to discuss practical solutions to the issue.
Dr Leese, who said the Business Secretary “took on board” the three proposals put to him, advised the Government to work alongside the industry.
His first proposal was for the Government to look at “cost containment measures” over winter, as relief for the industry is “not widespread”.
He went on to say: “Our second measure is to look at network costs within the UK. Network costs are distributed differently to other European countries in terms of energy intensive industries getting a higher proportion of the network costs, and that’s something within Ofgem’s gift.
“The third measure is to look at emergency measures, should any of our energy intensive plants need to shut down rapidly, looking at the threshold for emergency relief to try and prevent lasting damage to very expensive plants and equipment.”
Dr Leese added: “We’ve already seen the tip of the iceberg with fertiliser consequences – energy intensive industries manufacture goods throughout all supply chains, everything from minerals to paper goods.
“All of that is intrinsically linked. For example, when the fertiliser factory closed or paused, the CO2 is not just needed for food – we use it in the cement industry to supress explosion risk.
“Those goods are used throughout the supply chain, it’s all interlinked, so if one industry sector is affected, we’re all affected.”
It comes amid reports the Government is planning to introduce new charges on gas.
A new strategy will be published before the Cop26 climate conference in Glasgow next month, committing the Government to cut the price of electricity and impose a levy on gas bills, The Times has reported.
The Government will reportedly release a series of consultations before going ahead with the plan, which is likely to start in 2023 and could add £170 a year to gas bills.
Paul Richards, chief executive of Together Energy, which he said is currently making losses, told BBC Radio 4’s Today programme: “The price cap as a mechanism is not fit for industry, nor is it fit for customers.
“When the converse situation arises and the wholesale price starts to drop sharply, the price that will be passed through to customers in April might feel like a very, very poor deal, whereas at the moment the price cap feels like a price that is too good to be true.
“Although customers are protected in the short term I think we’re looking at somewhere between £1 billion to £3 billion in costs that are going to be spread back across business and households as a result of these failed suppliers.”
Suggesting reforms including inspecting the cap four times a year, Utilita Energy’s non-executive chairman Derek Lickorish said: “The cap is not fit for purpose.
“There is no doubt that there is going to be a huge cost paid by customers for failed suppliers… certainly well over £100 million for every 200,000 customers that fail.
“The Government has to look at means by which they can support not only energy suppliers but also big industry.”
A spokesperson for the Department for Business, Energy and Industrial Strategy said: “The UK’s exposure to volatile global gas prices underscores the need to move away from fossil fuels to protect consumers in the long term.
“We want to encourage people to take up more efficient technologies such as heat pumps and electric vehicles by removing levies on electricity over time, working with industry to drive down costs of technologies and ensure they are as affordable as current options.
“We’ll set out our upcoming heat and buildings strategy shortly. No decisions have been taken on our approach.”