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Since the beginning of 2021, 31 energy companies have ceased trading due to soaring wholesale gas prices, leaving over two million customers dependent on the safety net provided by the market regulator, Ofgem, to maintain their supplies and protect their credit balances while it moves them to a new supplier.
Additionally, Bulb Energy, with 1.7 million customers, has been placed in Special Administration. The government and the regulator have appointed Teneo to run the business until its future is decided, which may mean it being sold or closed down, with tits customers transferred to other suppliers.
The corporate failures are blamed on rising wholesale prices, particularly for natural gas, which has risen in price by over 300% since the beginning of last year. Thanks to the Ofgem cap on how much suppliers can charge for the energy they sell (see below), firms are obliged to set prices below what it costs them to buy wholesale gas and electricity.
The list below shows energy company failures stretching back to 2016. The recent spate of closures is evidence of the depth of the current crisis in the energy market. We’ll update the list if, as expected, further corporate casualties are announced.
Energy price cap rise
Ofgem announced in February 2022 that its price cap, which sets a limit on how much energy firms can charge its customers per unit of energy and associated standing charges, would rise by 54%, £1,277 to £1,971 on 1 April (this is the figure for a household with typical consumption values – actual bills will always be determined by how much energy is used).
The cap applies to approximately 11 million households on standard variable rate ‘default’ tariffs.
The cost of prepayment tariffs is also capped. It will rise by from £1,309 to £2,017 on 1 April, affecting around four million households.
Other tariffs, notably fixed rate, fixed term deals, are not subject to the cap. Prior to September 2021, it was the norm for fixed deals to cost significantly less than the level of the cap, but this is no longer the case because of the cost of wholesale energy.
What happens when a supplier goes bust?
The impact of a firm going bust is minimised by Ofgem’s safety net, which maintains their energy supply without interruption, and without customers having to take any action.
It arranges the transfer of customers’ accounts to a new supplier, working with the firms to honour customer credit balances and manage debt repayments.
Once the transfer is complete, each customer is free to move supplier if they wish although, at present, they are unlikely to find a cheaper tariff than their nominated supplier’s ‘deemed’ tariff, which is required to operate within the Ofgem price cap.
