Skyrocketing energy prices as multiple suppliers cease trading has left many consumers worried.
Surging demand post Covid, low wind speeds in Europe and power station closures, as well as a fire in Kent which cut off power supplies from France has created a “perfect storm” for the industry.
Experts have warned that just 10 of the suppliers that existed in January could remain by Christmas as the cost in wholesale gas prices soared by 250%.
Today small gas and electricity provider Bulb announced it was in crisis talks over its future.
Last week energy suppliers Utility Point and People’s Energy ceased trading in a move that affected half a million customers in the UK.
But the good news is if your energy company does go out of business you should be protected.
Below we answer some of the most pressing questions.
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Q: Are my bills about to go up?
A: It depends what energy deal you’re on and who your supplier is.
For starters, up to 15 million households who are on their suppliers’ standard tariff or other default deal, or those on a prepay meter, will see bills jump from October 1.
That is because Ofgem, the energy regulator, upped its price caps for both to allow suppliers to claw back these soaring wholesale costs.
The cap for standard tariffs is jumping by £139 a year, and for prepay meter customers by even more.
If wholesale prices keep surging, the caps could leap again in the spring – the next time Ofgem is due to review them.
Other customers on fixed rate tariffs will be hit when their current cheaper deal expires.
And households whose supplier goes bust could be landed with higher bills if the firm stepping in offers a tariff that’s more expensive.
Rui Vieira/PA Wire)
Q: My energy company went bust and I just don’t know what to do?
A: The first thing is not to panic as the industry has a system called Supplier of Last Resort (SoLR), which kicks in when an energy provider fails.
It means another will step in to ‘rescue’ those customers, meaning their gas and electricity supply is unaffected.
The system has worked well until now, but is being put under unprecedented strain.
Q: My energy company went bust and I was in credit – will I have lost that money?
A: No. The SoLR scheme protects your credit balance, meaning you start with that when the other supplier takes over.
The cost of saving suppliers in this way is borne by a levy on every customers’ bill, which funds the scheme.
It is different if you are in debt to your old supplier.
Firstly, that debt isn’t suddenly forgotten.
The new supplier can take it on or, if they don’t, those dealing with your old supplier’s collapse may try to recover it later from you.
Q: If my supplier goes bust, and another firm takes over my account, will they honour the terms of my current energy deal?
A: They could do but, in the current circumstances, may not want to because one of the reasons your old supplier went bust was because it was selling energy too cheaply.
Instead, the new supplier will offer you an alternative but it could end up being higher, potentially by a lot.
Q: Why don’t the big energy companies just step in to help the smaller ones and loan them some gas if that’s what we need?
A: The big suppliers have lost a big chunk of their business over the years to these small suppliers, so have no incentive to do so.
Also, they often blame these small suppliers for having risky business models that work fine when wholesale prices are low but can prove disastrous when they are sky high, like now.
Q: I’m already struggling financially and can’t afford any higher bills – what shall I do?
A: If you’re struggling to afford your energy bills, you might be able to take advantage of certain benefits, grants and help offered by the government and energy suppliers.
The Winter Fuel Payment, for example, is an annual one-off payment to help you pay for heating during the coldest months.
You can usually get the payment if you were born on or before 26 September 1955.
Cold Weather Payments are one-off payments to help you pay for extra heating costs when it’s very cold.
You might be able to get £140 off your electricity bill under the Warm Home Discount Scheme.
And if you’re in debt to your energy supplier, you might be able to get a grant from a charitable trust to help pay it off.
Contact your supplier or the likes of Citizens Advice.
Q: If this is just a short term problem can’t the energy companies hold off hiking bills and sort things out when prices come back down again?
A: There used to be a time when the energy market was dominated by the ‘Big Six’.
That has all changed with dozens of competing suppliers.
It has meant that profit margins have been squeezed, meaning many don’t have the reserves to absorb such cost increases for long.
Q: I’m starting to think we were better off when there were just the big energy companies – they might have been fat cats but at least we didn’t run out of energy.. what do you think?
A: It’s a fair question but, back then, those big suppliers punished customers for their loyalty, were bloated, and often failed to innovate.
Things have improved on most of those fronts but, when a crisis such as this hits, it shows what a precarious position some of these newer entrants are in.
Q: Are we going to get power cuts like back in the 70s?
A: There certainly is much talk of supplies of gas – and electricity – being impacted, and is one of the reasons wholesale prices have soared.
The other issue is that the UK has very low levels of gas storage.
Ultimately, power cuts are unlikely as the system is geared up to import energy from abroad, even if we have to pay through the nose for it.
What is at risk is temporary power cuts – either imposed or voluntary – for big energy users such as steelmakers and chemical plants.