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

Energy firms and the government have agreed the energy price cap will remain in place amid a record rise in gas costs.

Business Secretary Kwasi Kwarteng 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.

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.