On Wednesday it was announced that Green Supplier and Avro Energy had gone bust which brings the total to six energy companies to have gone under in September 2021
The collapse of the latest two energy companies has affected 735,000 customers and with Pfp Energy, MoneyPlus Energy, Utility Point and Peoples energy having all gone into administration this month, over 1.5m people have now been affected.
It was also revealed that that energy company Bulb was seeking a cash injection to help improve its finances although the company along with Octopus have told their customers ‘not to panic’.
Many of the smaller energy companies failed to hedge prices for the winter which put them under increasing financial pressure, exacerbated by low margins and soaring prices in a highly competitive market.
There has been concern in recent weeks that more companies are under pressure over the skyrocketing cost of natural gas and its impact on energy prices. In a statement in parliament today, business secretary Kwasi Kwarteng said that the government’s primary focus was ‘protecting consumers’ and that they will continue to protect consumers with the energy price cap, which keeps bills capped at £1,277 from 1 October.
He also stated that the government ‘will not be bailing out failed energy companies’.
In a Business, Energy, and Industrial Strategy Select Committee earlier this week, Kwarteng told MPs that the government was ‘looking at all options’ in response to the crisis, with the business secretary not ruling out an introduction of a windfall tax on businesses that have benefitted from soaring wholesale gas prices, referencing what is currently happening in Spain.
Kwarteng also indicated that he would be prepared to appoint a ‘special administrator’ that would see the energy companies taken on by the government, but he dismissed calls to scrap green levies to help alleviate the pressure on companies.
After crisis talks with Ofgem on Monday, Kwarteng said that there were ‘well-rehearsed plans’ in place to ensure consumers were not cut off with Ofgem announcing that customers will continue to receive gas or electricity even if the energy supplier goes bust as the regulatory body will move customers’ accounts to a new supplier.
The origins of this crisis can be traced back to last winter, which was particularly harsh and saw cold weather extend into April, depleting many natural gas stockpiles which has driven up the price of gas by 250% since January 2021.
The falling supply and rising demand is the overarching factor with data from Gas Infrastructure Europe showing that the continent’s natural gas stockpile is at 75% of what it was this time last year, the lowest level for the time of year since 2013.
This has put energy companies under pressure to increase consumer prices as their own costs have soared by 70% in August alone according to industry group Oil & Gas UK. There is some protection for customers as companies cannot charge above the price cap which has been set by the energy regulator Ofgem. This is set to rise by an extra £139 to £1,277 in response to the crisis from 1 October.