Proactive Investors - No energy firms chose to apply for emergency support under a government scheme designed to offer traders extra liquidity in response to volatile prices.
Devised by the Treasury and Bank of England, the Energy Markets Financing Scheme looked to guarantee energy firms a £40bn backstop to meet potentially higher demands from brokers between September and January.
Energy firms, such as British Gas, E.ON and Octopus could have applied for additional support alongside banks in the case of the latter demanding further cash or securities to cover potential losses.
British Gas owner Centrica PLC (LON:CNA) had reportedly been in talks for additional funds in September to meet rising collateral demands.
However, no firms took up the offer to apply despite the pressure of higher wholesale prices, leading to the scheme being wound down in January after costing £465,000.
“The Energy Markets Financing Scheme was designed to supplement existing commercial financing where this alone was not sufficient,” the Treasury said.
“Due to improvements in market conditions since the launch of the scheme, energy firms were able to access the necessary lines of credit from commercial lenders without the need for the government-backed guarantee.”
Gas, which determines prices across wholesale markets, rose to an August high of 640p per British thermal unit following the Ukraine war, but has since fallen back to around 100p, as per Trading Eonomics data.
This volatility, seen since late 2021, led to the collapse of 30 UK energy suppliers which were unable to pass on higher costs to customers due to regulator Ofgem’s price cap, after having failed to hedge energy prices.
Though prices have fallen and taken pressure of firms as a result, strict conditions preventing dividends, share buybacks and bonuses may also have deterred companies.
Centrica boss Chris O’Shea saw his pay increase almost five-fold to £4.5mln in 2022, after the company reaped the benefits from higher energy costs and recorded a record £3.3bn profit.