Gas and electricity provider Bulb, which has almost two million customers, is in crisis talks, in what could make it the fifth supplier to collapse in a month
Four more energy suppliers are expected to go bust this week, as small firms struggle to shoulder the costs of a 250% rise in wholesale gas prices.
Gas and electricity provider Bulb, which has almost two million customers, is today in crisis talks, in what could make it the fifth supplier to collapse in a month.
A Bulb spokesperson said: “Like everyone in the industry, we’re monitoring wholesale prices and their impact on our business.”
Utility Point and People’s Energy stopped trading last week affecting 500,000 households.
Energy prices are rising at an eye-watering rate due to 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.
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It’s created a “perfect storm” scenario which, according to Industry group Oil & Gas UK, has seen gas prices rise 250% since January, and 70% since August.
Dale Vince, boss of green energy supplier Ecotricity, warned many energy companies will not make it to Christmas and said action must be taken to remove price caps and tax on energy bills while building renewable energy “as if there’s no tomorrow”.
The industry has warned that of the 70 suppliers that existed in January 2021, just 10 could remain by Christmas.
Business Secretary Kwasi Kwarteng is today in crunch talks with industry experts.
On Sunday, he tweeted: “Some energy companies are facing pressure.
“Ofgem has robust measures in place to ensure that customers do not need to worry, their needs are met, and their gas and electricity supply will continue uninterrupted if a supplier fails.”
The Government is understood to be considering offering emergency state-backed loans to energy companies battling to stay afloat amid surging wholesale prices.
Emergency plans could see ministers introduce bailout packages and scrap green levies from customer bills to ease the short-term pain.
Taxpayers are also facing another surge in energy costs from February with firms warning the next cap – which limits how much firms can charge customers on the highest tariffs – will rise by another £280.
Normally when a supplier collapses, regulator Ofgem appoints another to take on their customers.
But wholesale costs have risen so much that big suppliers say they cannot afford to take on these new customers without incurring huge losses.
Why is there a gas shortge?
Gas supplies have been hit by a number of factors. To begin with, a cold winter in Europe had already put pressure on supplies and the amount of stored gas is far below normal levels.
High global demand, as well as maintenance issues and lower solar and wind energy output has pushed prices up.
In the UK, lower winds have meant less renewable energy is generated. There have also been outages at some nuclear stations and lower flows into the UK of natural gas from Norway.
Dermot Nolan, a former Ofgem chief executive, said the increases were the result of depleted stocks following a cold winter in 2020, as well as reduced supply from Russia, and increased demand for liquefied natural gas from the Far East.
How the gas shortage affects you
Will my energy bill rise?
Around 15 million households on standard tariffs and prepay meters will see their rise by around £139 a year (or £153 for prepay meters) from October 1 after Ofgem hiked the energy price cap to help suppliers claw back these rocketing costs.
Variable tariffs are the most expensive around – and are likely to rise again due to the current wholesale boom.
Those on standard tariffs could see an increase of £139, from £1,138 to £1,277, according to the energy regulator Ofgem. Pre-payment customers could see an increase of £153, from £1,156 to £1,309. These are all averages though and will depend on your personal usage.
Suppliers can increase bills up to the maximum allowed by the cap and, given the rise in wholesale gas prices – and by extension electricity prices – it is highly likely that they will.
What happens if a supplier goes bust?
Industry rules mean energy will continue to be supplied for affected customers and they will not lose money owed to them including any credit on balances.
Ofgem will move the household onto a new supplier who will then put them on a tariff that the customer can review. Once the switch is completed, you are free to move elsewhere. In the interim, customers are strongly advised to take a meter reading.
It’s worth noting that there could be delays in the switchover if too many firms collapse.
Honouring credit is likely to put companies off taking on new business.
If the company is not taken over, there are processes in place to appoint a special administrator to temporarily serve households.
Is it possible to get a cheaper deal?
If you haven’t switched in a while, it’s likely you’re paying the standard rate and that you could make a substantial saving by ditching your supplier.
Instead, you might want to consider locking in a fixed deal. With little competition right now, it’s worth aiming for a tariff with no exit fees as these give you the freedom to move should prices fall in the future.
You can also speak to your existing provider about a cheaper deal and compare tariffs online to help find the best deal for your usage.
It’s time well spent as a typical household saves around £280 by switching, according to regulator, Ofgem.
See our guide on how to switch and save on your energy bill, here.