Why are energy companies going bust? As Bulb enters administration, here’s why UK energy suppliers are at risk

As Bulb joins Green, Avro Energy and more small energy suppliers which have gone bust due to the impact of skyrocketing gas prices in the UK, here’s why gas and electricity suppliers are struggling – and how many companies have ceased trading

Monday, 22nd November 2021, 1:50 pm

Bulb Energy has joined more than 20 energy companies exiting the energy market this year, announcing on Monday (22 September) that it would be entering administration due to the rising costs of wholesale energy prices.

Wholesale gas prices have climbed by 250% since the start of 2021 and saw a 70% spike in August alone.

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The energy price cap is set to remain in place but household energy bills have risen by roughly £139 a year to £1,277 for typical gas and electricity customers since 1 October.

The increase to UK energy costs also came as the Universal Credit £20 uplift ended in early October.

But which energy suppliers have gone bust under the weight of increased wholesale gas prices – and why are energy companies going bust?

Here’s what you need to know.

Which gas companies are in trouble due to UK gas shortage? The energy suppliers at risk of going bust due to gas 'crisis' - and is Bulb one of them? (Image credit: Leon Neal/Getty Images)

Why are energy companies going bust?

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.

Small suppliers are also at greater risk of struggling to stay afloat if they have not engaged in hedging.

A general view of the People's Energy offices at Shawfair Park on September 20, 2021 in Dalkeith, Scotland. The failed company supplied gas and electricity to around 350,000 homes and 1,000 businesses. (Image credit: Jeff J Mitchell/Getty Images)

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.

As a result, more than 20 companies have already been forced to close their doors due to rising gas costs.

Green energy supplier Bulb Energy has become the latest British company to go into administration after struggling to contend with the costs of supplying gas to customers at its current rate.

Prime Minister Boris Johnson opened Bulb’s London headquarters in July, but was reportedly seeking a bailout in September due to the rising wholesale costs of gas.

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.”

The firm’s 1.7m UK customers were previously impacted by 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.

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:

- HUB Energy (9 August)

- MoneyPlus Energy (7 September)

- PFP Energy (7 September)

- People’s Energy (14 September)

- Utility Point (14 September)

- Green Supplier Limited (22 September)

- Avro Energy (22 September)

- Enstroga (29 September)

- Symbio Energy (29 September)

- Igloo Energy (29 September)

- Colorado Energy (13 October)

- Pure Planet (13 October)

- Daligas Limited (14 October)

- GOTO Energy Limited (18 October)

- Bluegreen Energy Services Limited (1 November)

- Ampoweruk Ltd (2 November)

- Zebra Power Limited (2 November)

- MA Energy Limited (2 November)

- Omni Energy Limited (2 November)

- CNG Energy (5 November)

- Social Energy Supply Ltd (16 November)

- Neon Energy Limited (16 November)

- Bulb Energy (22 November)

The fall of Midlothian gas company, People’s Energy, saw the firm’s almost 500 jobs in the region put at risk.

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 tweeted.

“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.”

UK Business Secretary 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

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