Energy

UK households face £3.2bn bill for collapsed energy suppliers


British households face a bill of more than £120 each for rescuing Bulb and the other 24 electricity and gas suppliers that have gone bust in the last three months in the sector’s worst crisis for 20 years, according to the latest estimate.

Research published by Investec on Monday said that Bulb’s collapse last week requiring a government bailout of £1.7bn pushed the total bill for consumers to rescue the suppliers that have failed since the start of August to £3.2bn, the equivalent of around £120 per household.

The estimate is a 60 per cent increase on the bank’s last forecast earlier this month and higher than other estimates recently by the likes of market leader Centrica. It adds further urgency to calls for an inquiry into the crisis, which has affected nearly 4m households.

Energy suppliers have been hit by unprecedented surges in wholesale prices since the summer, although industry executives, consumer groups and opposition politicians have also accused the government and regulator Ofgem of serious policy and regulatory failings.

Emma Pinchbeck, chief executive of Energy UK, a trade body, said that “we certainly need a full examination of regulation and policy in this area” once “some stability hopefully returns to the market.

“We have been warning about the fragility of the retail sector for some time,” she said, adding that “suppliers exiting the market, especially in these numbers, imposes very significant costs on customers and the rest of the market”.

Bulb, Britain’s seventh biggest supplier with 1.6m customers, was placed last week into “special administration”, a form of quasi nationalisation. It was considered by Ofgem as too big to be rescued via the normal “supplier of last resort” safety net that quickly transfers customers of a collapsed company to an alternative provider via an auction process.

Under the latter, companies rescuing orphaned customers can recoup their costs via an industry levy that ends up on customer bills. Although Bulb is being handled differently, energy industry executives still expect costs of rescuing the company to eventually be added to consumer energy bills.

These costs will be particularly high due to the significant difference between how much special administrators and alternative suppliers can charge households under Britain’s energy price cap — currently set at £1,277 per year per average household — and the cost of buying the energy required to supply them at current wholesale prices.

Investec estimated that difference at currently around £600 per household.

Although the full £120 increase may not hit consumer bills in one go, Martin Young, author of the Investec research, said that any increases in costs for consumers would be “hardly welcome when fuel poverty is an issue, inflation is an issue, and commodity costs look set to push energy bills up”.

Peter Smith, director of policy at National Energy Action, a fuel poverty charity, called the last three months “one of the most worrying starts to winter I can remember”.

“Lessons need to be learnt about the energy crisis,” he said, although he added that the immediate focus must be on helping households get through the winter.

MPs on the House of Commons business, energy and industrial strategy select committee are expected to discuss on Tuesday holding an inquiry into the crisis early next year. Ofgem chief executive Jonathan Brearley will also appear before a House of Lords committee on Tuesday.



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