Business In News
Renewable and nuclear power generators will be asked to supply electricity well below current market rates through new contracts that critics said risked locking consumers in a bad deal.
Ministers are also understood to have approached several of the biggest North Sea producers about deals to supply gas below today’s sky-high market prices, as Liz Truss announced a new energy supply taskforce that she said was “already negotiating new long-term energy contracts with domestic and international gas suppliers”.
The interventions in the wholesale energy markets aim to reduce the costs of the government’s commitment yesterday that it would cap and freeze energy prices for households for two years and for businesses for six months.
Rising gas prices have lifted the wholesale electricity price and given windfall profits to older wind, solar and nuclear plants, whose costs have not risen.
The government said that it would “negotiate with renewable producers to reduce the prices they charge”, moving them to contracts locking in a long-term lower price. More recent projects already have such contracts. Truss said this move would “mean that generators are receiving a fair price reflecting their cost of production”.
Industry experts warned that the government was in a weak negotiating position, with generators likely to seek very attractive terms to compensate them for forgoing high prices now, especially as Truss has ruled out the alternative of a windfall tax.
The Resolution Foundation warned that the plan — backed by energy companies including SSE and EDF — risked “delaying but locking in those windfalls” while Labour said it would be “a terrible deal for the British people”. However, Rob Gross of the UK Energy Research Centre, which first proposed the idea, said “a dodgy deal is not inevitable” as prices could be capped.
Business groups welcomed the promise of a price freeze, though KPMG said many would be “concerned about what happens after the six months of support”. The government has said it will then target the sectors it judges to be most in need, such as hospitality.
Renewable and nuclear power suppliers will be asked to cut prices