Which energy companies have gone bust due to UK gas shortage? The suppliers at risk of collapse due to gas 'crisis' - and is Bulb one of them?
As Green and Avro join five small energy suppliers which have gone bust due to the impact of skyrocketing gas prices in the UK – here’s who could be in trouble due to the gas shortage and why
The UK Government said on Monday that it had been holding roundtable discussions with senior representatives of larger energy suppliers as gas prices continue to rise to new highs.
Wholesale gas prices have climbed by 250% since the start of 2021 and saw a 70% spike in August alone.
Business Secretary Kwasi Kwarteng said that he would be meeting with smaller suppliers, disproportionately affected by rising costs, as well as the UK’s “big six” energy suppliers – British Gas, EDF Energy, EON, Npower, Scottish Power and SSE.
The energy price cap is set to remain in place but rise by roughly £139 a year to £1,277 for a typical gas and electricity customer from 1 October.
The increase comes as the Universal Credit £20 uplift ends in October.
But which energy suppliers are expected to fold under the weight of increased wholesale gas prices?
Here’s what you need to know.
Why are some gas suppliers in trouble?
The increased costs of wholesale gas in the UK have imposed tough trading conditions for many energy suppliers and gas companies who now find themselves paying higher costs for gas than they are receiving from customers.
Currently, customers of smaller energy suppliers will be paying less for their gas than their suppliers are, leaving little room to meet the costs of trading and profit.
As a result, five companies have already been forced to close their doors due to rising gas costs.
Which energy companies have already gone bust?
The companies which have already gone into administration due to the climbing costs of wholesale gas prices are:
- Green Supplier Limited (22 September)
- Avro Energy (22 September)
- Utility Point (14 September)
- People’s Energy (14 September)
- PFP Energy (7 September)
- MoneyPlus Energy (7 September)
- HUB Energy (9 August)
The fall of Midlothian gas company, People’s Energy, has seen the firm’s almost 500 jobs in the region put at risk.
What gas suppliers are at risk?
Green energy supplier Bulb Energy is among the British companies struggling to contend with the costs of supplying gas to customers at its current rate.
The company recently saw Prime Minister Boris Johnson open its London headquarters in July, but is now reportedly seeking a bailout due to the rising costs of gas.
The firm has 1.7m UK customers which were impacted by previous price hikes in 2020, as energy companies struggled to cope with the economic impact of the coronavirus pandemic and growing demand for household energy.
2020 saw Bulb, a company already known for its sizeable losses, saw £63 million in losses in the year up to 31 March 2020.
The Financial Times reported that Bulb was in the process of seeking new funding, with a Bulb spokesperson commenting: “From time to time we explore various opportunities to fund our business plans and further our mission to lower bills and lower CO2.
“Like everyone in the industry, we’re monitoring wholesale prices and their impact on our business.”
Dozens of smaller energy suppliers are also facing challenges due to the rising costs of gas.
Chief among them was sustainable energy company Green, but on Wednesday afternoon it was announced that Green Supplier Limited had ceased trading with immediate effect along with Avro Energy.
Peter McGirr, chief executive of Green, had said on Monday that things were “looking bleak" for the energy supplier based in the north east of England.
He said: "I feel that without any support mechanism being put in place by Government, it's unlikely we will see the winter through."
The fall of Avro Energy and Green Supplier Limited will see their combined customer base of 830,000 customers reassigned to a new supplier by Ofgem.
Small suppliers are at greater risk of struggling to stay afloat if they have not engaged in hedging.
The costly process of hedging allows energy suppliers to buy their energy with a layer of insurance attached, reducing their exposure to volatile wholesale prices.
But for smaller, independent firms operating with reduced margins, the expense can often be too much – leaving many such companies now susceptible to skyrocketing gas costs.
What did Octopus Energy’s CEO say about the UK’s energy issues?
Octopus Energy is one of the UK’s larger energy companies expected to survive the current issues plaguing the energy market.
The relatively young energy company, established in 2015, has almost two and a half million UK customers, supplying one in 10 households in Scotland.
Octopus founder Greg Jackson told Sky News on Monday that customers need not fear for disruption of supply.
Mr Jackson said “obviously there will be no disruption to supply, and customers can sit tight on that” and stressed the need to "be calm and work our way through” the issues currently plaguing the gas market.
The founder also took to Twitter on Monday to say that talk of a UK gas ‘crisis’ risks giving greater power to the Big Six.
"Make no mistake - there are real issues in energy caused by global gas and shortfalls in UK nukes - but the idea of "crisis" is being pumped up by the former Big 6 in order to try to bounce govt and regulators into restoring the cosy oligopoly they used to enjoy,” Mr Jackson wrote on Twitter.
“Undoubtedly, there are idiot companies out there who offered bonkers low prices when market was low, and seek bailout now it's high,” he continued.
"They don't deserve a place in a critical market.
"And the [Big Six] habitually overcharged for their bloated operations through opaque prices.”
Kwasi Kwarteng said the UK Government would not bailout "failed companies" and in a joint statement with Ofgem said that “the top priority must be ongoing support for energy customers, especially the elderly and vulnerable”.
What happens if my energy supplier goes bust?
If your energy supplier is one which is forced to close due to the impact of gas prices and shortages in the UK, then you do not need to do anything.
Your supply won’t be disrupted and if you are already switching to a new supplier, the switch will continue as normal.
The UK energy regulator Ofgem will take action to appoint a new company to take over customers of an existing company should it enter administration.
For instance, the decline of People’s Energy has seen Ofgem appoint British Gas to take over the company’s thousands of customers.
Go to Ofgem's website to find out more.
Additional reporting by PA