The UK’s energy regulator is reportedly bracing for a fresh wave of supplier collapses in the coming days as the industry energy crisis continues.
At least four suppliers were in talks Tuesday with the Office of Gas and Electricity Markets (Ofgem) about entering its Supplier of Last Resort (SOLR) system, Sky News reported.
Sky News also reported that the development is expected to add several hundred thousand households to the toll of those impacted.
Pure Planet, Ampower, Zebra Energy and Neon Reef are believed to be among the companies at risk. Pure Planet alone has around 250,000 customers.
Why are energy suppliers collapsing?
A global shortage of natural gas has led to a huge rise in wholesale prices as world economies recovery from Covid-19 lockdowns and the subsequent collapse of energy suppliers in the UK.
Current gas prices reflect a number of factors, the UK government explained, including an uptick in global gas demand, particularly in Asia, less Liquified Natural Gas (LNG) reaching Europe – impacted by weather events in the US, preventing LNG exports.
These factors have caused spikes in wholesale electricity prices, with a number of short-term markets trading at, or near, record levels.
Which energy suppliers have collapsed so far?
Twelve energy firms have gone out of business this year – including ENSTROGA, Symbio, Avro, Green, Igloo, Utility Point, People’s Energy, PFP Energy, MoneyPlus Energy, Hub Energy and Simplicity Energy, with more likely to follow this week.
It has forced some 1.7 million households in the UK to switch providers.
E.ON took 233,000 of those customers on board, British Gas (Centrica) took on board 448,000 – and Avro Energy was the biggest – in terms of customers supplied - to collapse, leaving its 580,000 customers with Octopus Energy as their new supplier.
Customers of the failed suppliers, who were switched to a new supplier, were protected by the Energy Price Cap – a government scheme which protects millions of people from sudden increases in global gas prices. The cap sets the maximum price for standing charges and each unit of gas and electricity used by customers on default energy tariffs.
What does it mean to enter the Supplier of Last Resort (SOLR) process?
This is when the energy regulator Ofgem directs any gas or electricity firm to take on a failed supplier’s customers. When it chooses a supplier, it must be satisfied that they can supply additional customers without significantly prejudicing their ability to continue to supply their existing customers.
It then chooses the new supplier following a competitive process designed to get the best deal for consumers. Household credit balances are protected.
Is the UK going to run out of gas?
Ofgem said it was confident, alongside the British government, that the UK’s security of energy supply is secure now and over the winter.
The UK has a range of supply sources including direct pipelines across the North Sea from Norway to the UK. It is also investing millions into scaling up strong renewable energy capacity and driving down demand for fossil fuels.