More UK energy firms are predicted to go bust in 2023 according to one expert. The boss of Centrica, parent company of British gas made the stark prediction that many UK energy firms are already insolvent.
Centrica Chief Executive Chris O’Shea is reported in the Daily Mail as suggesting some small energy firms have already run out of cash. This would render them as technically insolvent which makes for uncomfortable reading for many.
Mr O’Shea also made the further prediction that some larger UK energy providers are at risk of folding within the next year following 30 UK energy firms failures in the past 18 months alone.
MPs have been fiercely critical of the regulator, Ofgem, for allowing a raft of energy retailers to set up without proper checks. One of the biggest scandals involved Bulb, which collapsed in February and is set to cost the public as much as £6.5 billion to rescue its customers.
Mr O’Shea told the Financial Times: ‘There are companies in our market that are unable to raise the capital required to properly back their business.’
Last week, Ofgem set out a series of reforms for the energy retail market, however industry leaders claim these reforms are doomed to fail.
O’Shea was speaking at the Easington gas terminal near Hull on the east Yorkshire coast, which is processing gas from the Rough offshore storage site in the North Sea.
The storage facility was shut down in 2017, however it has been re-opened with the backing of the government to help the UK survive energy supply shocks.
Centrica has been discussing making a £150m investment to double the gas storage in Rough to 60bn cubic feet by next winter with the Government.
Rise in energy suppliers going bust
Since the beginning of 2021, 31 UK energy firms 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
Bulb Energy, with 1.7 million customers, was been placed in Special Administration while it moves them to a new supplier. 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 UK energy firms 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.
What happens when a energy 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, unpaid invoices 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.