energy companies costs the UK over £500,000

An unutilized assistance program for energy companies costs the UK over £500,000

Under the direction of Liz Truss, the Treasury had discreetly spent approximately half a million pounds on an unused emergency scheme for energy traders this year.

To stabilize the energy and financial markets, the Treasury and the Bank of England created the Energy Markets Financing Scheme (EMFS), a £40 billion government-guaranteed backup fund.

The scheme was intended to provide liquidity to energy traders in the face of massive margin calls—demands from brokers to deposit additional cash or securities to cover potential losses—but it was closed in January as a sharp drop in wholesale gas prices earlier this year relieved pressure on energy firms.

The Treasury said it spent £465,000 on “external technical consultants to support the creation of the EMFS” when the Guardian requested freedom of information.

The Treasury had invited 11 commercial banks and 20 energy firms to a technical video call regarding the scheme. Between October and the end of January, no applications from energy companies or banks were submitted.

The law firm Hogan Lovells received £65,000, while the global management consultancy, FTI Consulting, for its advisory role, received £400,000.

As per Tussell, a data analysis firm, the original government contract was worth up to £4.9 million for providing market research and consulting services by FTI.

The plan was unveiled by Truss as a component of a series of steps to stop the energy crisis from inflicting further harm this winter. The former prime minister also assisted households and businesses at the time, though both of those programs were later scaled back to save money.

The Treasury conveyed: “The scheme was introduced as part of a range of contingency measures to support the energy sector.”

“Since the launch of the scheme, prices in the wholesale gas markets have declined markedly, and this has reduced some of the pressure facing eligible energy firms.”

It further added: “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.”

“The EMFS was designed to supplement existing commercial financing where this alone was not sufficient with penal pricing and conditions upon drawdown set, so it would only be used if commercial and competitively priced financing was unavailable on the market. It was not intended to replace commercial lending.”

The Bank of England refrained from revealing the total amount spent on its part in the creation of the EMFS.

Industry sources revealed that strict conditions prevented companies from paying bonuses to their executives or dividends to shareholders, as the scheme’s use had also discouraged the energy companies.

The government’s spending on energy support schemes has been the target of criticism as households and businesses are dealing with high bills inflated by gas prices due to the war in Ukraine.

Jeremy Hunt retracted a proposal in his budget to cut back on the generosity of home help, but he kept the April 1st starting reduction in financial energy aid for companies. 

Business organizations have warned that many companies are now considering closing due to unaffordable expenditures and have dubbed the assistance for businesses as “scattergun.”

The chief executive of UKHospitality, which represents pubs, restaurants, and hotels, Kate Nicholls, revealed that “The significant reduction in energy support comes as a hammer blow to thousands of hospitality businesses that are already struggling with extortionate energy bills that are already double what they were a year ago.”

“This could not come at a worse time as venues continue to also grapple with record food and drink price inflation, which is showing no signs of slowing down.”

- Published By Team Timeswire

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