Which energy supplier will go bankrupt next? Business

When these companies collapse, their customers are ceded to another competitor through what is known as the “supplier of last resort” mechanism, a safety net that ensures the continuity of gas and electricity to households.

But the transition is neither easy nor cheap. The energy company that collapsed will not necessarily have covered its energy costs, which means that taking customers in this way can be costly for the new supplier.

According to energy regulator Ofgem, the cost of taking care of uncovered customers is around £ 700 each. It’s basically the difference between what it actually costs to deliver energy to consumers and what suppliers are allowed to charge for a variable rate under the government’s current energy price cap.

When applied to the 2.1 million customers left stranded, excluding Bulb’s, this translates into a cost of around £ 1.5 billion to surviving energy providers, predicts Young from Investec.

In addition, defaulting suppliers may also owe money through various renewable energy programs – unpaid debts totaled £ 277million at the end of fiscal year 2020/21.

These hits are not simply absorbed by other companies. Instead, the sums are pooled and distributed among all households through a levy on energy bills.

The Bulb collapse will almost certainly increase the costs facing households – the only question is by how much.

As the UK’s seventh-largest energy supplier, Bulb is too large for its customers to be transferred to a rival, which has led the government to effectively nationalize the company through special administration.

This unprecedented intervention in the market will let administrators run the business until a buyer is found, or some other solution such as dividing its customer base into batches and sharing them with other vendors. According to reports, asset manager Lazard has been recruited to host a Bulb auction.

But the wholesale gas market is still hot, and experts remain skeptical about whether anyone will come forward to take over what’s left of the business – and its debts.

This means the administrative process could end up costing taxpayers hundreds of millions of pounds as Bulb stays up and running all winter. Meanwhile, Young predicts that the cost to providers of servicing uncovered customers could potentially exceed £ 2 billion, adding around £ 75 to every household’s energy bill.

For now, the industry can only wait and see if more suppliers fall victim to the sharp swings in the gas market, with 26 still standing, and who they might be.

Whatever happens next, experts all agree on one thing: Whether through higher taxes or higher bills, consumers will ultimately bear the costs of these failures.

Even higher energy bills to come, warns Scottish Power

The boss of one of the country’s largest energy providers has warned of several increases in energy bills as soaring wholesale gas prices affect household finances.

Keith Anderson, managing director of Scottish Power, which has 4.6 million customers, warned customers will have to foot the bill for higher wholesale prices, as well as businesses that have collapsed as a result.

“We’re going to have all the costs of all of these market failures and all of these regulatory and corporate failures,” he told BBC Radio 4’s Today program.

“They will pass and all the customers will have to pay for it as well. Sadly, we therefore envision a future of two or three price hikes to come due to the state of this market.

A global gas supply crisis has triggered a six-fold increase in wholesale gas prices, pushing more than 20 companies with nearly four million customers out of business since early September.

Bulb, which has 1.7 million customers, on Monday became the latest supplier to collapse and is now backed by a special taxpayer-funded administrative scheme until it can be sold or other housing found for its customers.

Bulb blamed its demise on rising wholesale prices combined with price caps on energy bills, although Mr Anderson suggested the company also did not purchase enough energy in advance at lower prices.

Households have yet to feel the full force of the wholesale price hike as the energy price cap prevents companies from immediately passing on costs, but that will be reset in April when experts estimate it. could increase up to £ 600.

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This notice was published: 2021-11-23 17:22:22

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