A shape rise in gas prices may not be temporary and more energy suppliers could find themselves out of business within months, the chief executive of Ofgem has warned.
Jonathan Brearley admitted that “well above” hundreds of thousands of customers could be impacted.
“Have a look at the change in the gas price – it really is something that we don’t think we’ve seen before at this pace,” he said.
“We do expect a large number of customers to be affected, we’ve already seen hundreds of thousands of customers affected, that may well go well above that. It’s very hard for me to put a figure on it.”
Speaking to MPs at a Business, Energy and Industrial Strategy Select committee hearing, he added that it was difficult to put a figure on how many firms might go to the wall, saying: “We are going to want to have a ‘lessons learned’ after this.”
He added: “We do expect more (suppliers) not to be able to face the circumstances we’re in.”
And it emerged that Ofgem and the government were warned as early as two years ago about the fragility of the energy sector.
Emma Pinchbeck, the chief executive of supplier trade body Energy UK, said: “I took this job a year ago. When I was hired, the chairman of Energy UK said that your biggest challenge is going to be the vulnerability of the retail market.
“I know that for a year or more before that my team have been making the case to the regulator and the government that the sector is fragile.”
The taxpayer could have to pay tens of millions of pounds to subsidise a major US-owned fertiliser manufacturer to ensure the supply of CO2 for the food sector continues amid the energy crisis.
A deal brokered by Business Secretary Kwasi Kwarteng will see the government provide “limited financial support” towards CF Fertilisers’ running costs to prevent a food supply shortage at Britain’s supermarkets.
The agreement will be in place for three weeks while the “CO2 market adapts” to the surge in global gas prices, according to the Department for Business, Energy and Industrial Strategy (Beis).
Environment, Food and Rural Affairs Secretary George Eustice said the final details of the agreement were still being worked on but “it’s going to be into many millions, possibly the tens of millions”.
CF Fertilisers suspended production at plants in Teesside and Cheshire due to soaring energy costs as global gas prices spiked.
The CO2 produced as a by-product at the plants is vital to the food industry, where it is used to stun animals in slaughterhouses and to keep packaged products fresh.
Eustice defended the decision to pump tax money into the firm.
“The truth is, if we did not act, then by this weekend, or certainly by the early part of next week, some of the poultry processing plants would need to close, and then we would have animal welfare issues – because you would have lots of chickens on farms that couldn’t be slaughtered on time and would have to be euthanised on farms. We would have a similar situation with pigs,” he told Sky News.
“There would have been a real animal welfare challenge here and a big disruption to the food supply chain, so we felt we needed to act.”
It was “justified for the government to intervene in this way, in a very short-term, targeted way” because “if we didn’t, there would be a risk to our food supply chain – that’s not a risk the government is willing to take”, he told BBC Radio 4’s Today programme.