More energy firms will go bust this winter and some are already struggling for cash, warns British Gas boss
MORE struggling energy firms will go bust this winter, warns the boss of British Gas.
Chris O’Shea, head of Centrica which owns British Gas told the FT that some firms are “struggling for cash.”
And some of the UK’s largest energy suppliers are at risk of folding after 30 suppliers collapsed in the past 18 months.
Firms struggled to cope with rising wholesale prices which left many smaller companies to collapse.
Suppliers are not able to pass on high wholesale prices to customers on fixed deals and those on standard variable tariffs have their unit rates capped under the energy price guarantee.
This means suppliers find themselves in a position of selling energy for less than they bought it.
It’s now thought that some energy firms are trading even though they’re technically insolvent, according to the Centrica boss.
And warmer weather during October and November will have likely contributed to further losses by firms.
To prep for the increased demand during the winter months, suppliers buy their energy in advance in a process called hedging.
But because households haven’t been rushed into turning their central heating on this autumn, energy suppliers will have lost out.
Big firms like Centrica, see their shareholders bare the brunt of these losses but the operations of large companies without adequate cash reserves become “riskier” at times like this said Mr O’Shea.
The last big supplier to collapse was Bulb in November 2021, which at the time had 1.7million customers.
Due to its size, Ofgem could not get another supplier to take on Bulb’s customers.
Instead, Bulb was placed into special administration at a cost of £6.5billion to the taxpayer.
This has allowed the firm to operate as normal for now.
And Mr O’Shea said that households are having to foot the bill for these collapsed suppliers every time their energy bills come through.
He told the Mirror that: “The poorest in society pay £94 and the richest in society pay the same £94. It’s an outrage.”
Octopus Energy announced a deal to buy out Bulb back in October.
But on Tuesday (November 29), E.ON, British Gas and Scottish Power challenged the government’s decision to approve the deal.
A spokesperson for Octopus Energy said: “We will continue to work hard to get this resolved as fast as possible.”
Negotiations between providers are ongoing.
It comes after Ofgem announced that it would introduce price controls on the charges local energy networks ask from consumers.
Local energy networks are in charge of linking your home with the grid and a small proportion of a household’s energy bills goes towards funding these networks.
Ofgem has announced that it is now fixing these charges at £100 a household per year until 2028.
Earlier this week the Secretary of State for Business, Energy and Industrial Strategy, Grant Shapps, wrote to energy firms to warn them about hiking customer direct debits.
Mr Shapps said that he was “disturbed” by recent reports which show that energy firms are upping the direct debits of customers who have reduced their usage.
What happens if your energy supplier goes bust?
In the event that your supplier goes bust, you won’t actually need to do anything. And you won’t lose any money and you’ll still be provided with energy.
Ofgem will provide you with a new supplier.
So there’s not much you have to do, but there are things to keep an eye on to make sure you don’t lose out on any cash in the process.
Ofgem breaks it down into three simples steps that you need to take:
The regulator says the first thing you should do is take a meter reading and wait until your provider is switched over, you can cancel any direct debit if you want to as well.
You don’t need to take any action though, and your supply won’t be disrupted, so sit tight until the move is complete. Ofgem says it should only take a few days.
Ofgem’s advice is to ask to be put on the new provider’s cheapest tariff or move on after if you wish. They can also give you information on how they will manage your account balance, including any credit refunds.
Will my energy be cut off?
Your energy supply won’t be disrupted if your provider goes bust.
You’ll also be moved onto your new tariff as soon as possible.
Your old tariff will end though and you’ll be put on a new “deemed” contract which is one you haven’t chosen and can leave whenever you see fit.
Unfortunately, deemed contracts can be more expensive as the supplier takes on more risk.
In some cases they have to buy extra wholesale energy at short notice for the new customers, so they charge more to make up for it.
If you had credit left on your account from your old supplier it’ll be paid back to you during the change over – your new supplier will explain how to claim once it’s been chosen for you.
If you have debts, you may have to pay this back to your new supplier if they decide to take on the bust company’s debts.
The decision on a new supplier will be made as soon as possible by Ofgem where it will announce the full details on its website and social media.