The steel industry is a big consumer of energy (Image: Jonathan Myers)

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Ministers have been urged to intervene to prevent a crippling rise in electricity costs for the steel industry.

Energy watchdog Ofgem plans to allow a hike in prices in a move critics fear will further damage the sector.

MP Stephen Kinnock, who chairs the All-Party Parliamentary Group on Steel and Metal-Related Industries called on Business Secretary Kwasi Kwarteng to block the cost increase, revealed in a Targeted Charging Review announcement by the regulator.

In a letter seen by the Mirror, Mr Kinnock said: “Shockingly, Ofgem is proposing to implement the worst possible outcome for the steel sector … which would double network charges.”

Stephen Kinnock, Labour MP for Aberavon, chairs the All-Party Parliamentary Group on Steel and Metal-related Industries

The Mirror told this year how cash-strapped British metals’ firms pay twice as much for electricity as French rivals and 50% more than German counterparts.

An industry study, The Energy Price Scandal: A Fair Power Deal for UK Steel, showed the average electricity price for steel producers in the UK is about £65 per megawatt hour (Mwh), compared with £31/MWh in France and £43/MWh in Germany.

Experts fear the extra overheads will hamper attempts to make the industry more environmentally-friendly by slashing emissions.

A switch to greener electric arc furnace technology will see firms use much more power.

Using more electricity would be greener but cost more
(Image: PA)

Mr Kinnock's letter adds: “Despite extensive and in-depth representation made to the energy regulator on the impact of this reform on the sector, its competitiveness, and ability to decarbonise, Ofgem still chose to propose a significant charge increase.

“When the sector faces increasing calls to decarbonise, it is astonishing that the regulator would choose to make this even harder and considerably damage the competitive business environment for energy intensive industries.”

UK Steel director-general Gareth Stace said: “The continued disparity between the electricity prices paid by UK steelmakers and our European competitors is huge, and a massive disincentive to investment in the UK.

“Every year, £50million extra is spent on electricity costs that could otherwise be productively invested.

The sector is under pressure to cut emissions
(Image: Media Wales)

“The cost for the decarbonisation of the steel sector will run into the billions, and failing to remove these barriers to investment only makes the route to decarbonisation harder.

“Ofgem themselves have acknowledged that UK steel producers are charged far more than those in other nations.

“Recognising this is not enough, words are not enough.

UK Steel director-general Gareth Stace
(Image: Edward Moss Photography)

“Only actions matter, and we urge the government to remove this millstone from the neck of our sector.”

Community steelworkers' union operations director Alasdair McDiarmid said: “Our steel industry has to decarbonise, but all the options require more electricity and we need urgent action to bring down the UK’s sky-high prices.

“Currently we pay twice as much for electricity as our EU competitors, which is a major competitive disadvantage as well as a barrier to delivering the Government’s climate objectives.”

Community union operations director Alasdair McDiarmid
(Image: Community union)

An Ofgem spokesman said: “We expect our package of reforms to save consumers around £300million a year over 20 years.

“The changes will make sure that domestic consumers do not pay some of industry’s costs.

“All customers, from households to heavy industry, share the costs of the electricity networks.

“We’re changing network charges so they fall fairly between all consumers in future, including large industries which use more electricity.

The Mirror has been campaigning to Save Our Steel since 2015

“Ofgem’s role is to protect all consumers and we recognise the important contribution large industries play in the economy which is why we’re working closely with government at options for additional support.”

A Business Department spokesman said: “We remain committed to supporting UK steelmaking to make the industry more energy efficient, cutting their bills in the process.

“This includes our Decarbonisation Strategy to support industry to cut emissions, as well as hundreds of millions of pounds in support to the industry, both through dedicated funds and through relief from higher energy bills.”