Ofgem will appoint new firm to take on 176,000 households affected by collapse of Bristol Energy owner
Together Energy has become the latest supplier to go bust weeks after the struggling council-owned company assured its customers that the business was stable despite record-high gas market prices.
The energy regulator, Ofgem, will appoint a new supplier to take on the 176,000 households affected by the collapse of Together Energy, and its subsidiary Bristol Energy, which are part-owned by Warrington borough council.
The energy company was forced to deny press reports earlier this year that it was on the brink of calling in administrators and told customers that the company was “stable” and operating on a “business as usual” basis.
Bristol Energy said it was “saddened” to announce its exit from the UK’s energy market but it was “untenable for us to continue”. It also denied press reports that suggested it had not bought enough gas and electricity to meet its customers’ needs.
Warrington borough council is thought to be on the hook for about £52m in equity, loans and guarantees to the company, which is based 200 miles north in Clydebank.
The council’s investment was made in 2019 with the aim of earning a return to plug holes in its budget left by central government cuts to local authority budgets. The council also hoped to use its stake to advance tackling issues such as fuel poverty and global heating.
However, critics warned the energy supplier was a bad investment from the start, due to the company’s poor customer ratings and risks from wrapping up taxpayers’ money in a complex industry exposed to changeable wholesale markets.
Councillor Ken Critchley, who speaks for the opposition Conservatives on finance, said Together Energy was loss-making before Warrington bought its stake, “It’s the taxpayers and residents of Warrington who are going to bear the consequences of this ill judged investment by the Labour led Council,” he said.
A spokesperson for the council said it was “disappointed” that Together Energy was ceasing to trade due to the current energy crisis.
Together’s collapse makes it the 27th energy supplier to go bust since gas market prices began a steep ascent to record highs in August last year, leaving more than 2m households in need of a new supplier.
The fate of a further 1.7m Bulb Energy accounts is yet to be decided by a special administrator, which was appointed to handle the large-scale collapse.
Gillian Cooper, the head of energy for Citizens Advice, said: “As well as causing considerable disruption and confusion for customers, today’s announcement will add to the £2.6bn bill consumers are already facing due to these failures.”
“The government must spread the cost of supplier failures so people aren’t left to foot a sky-high bill for chaos in the energy market, just as prices rise,” Cooper added.
The latest collapse will pile pressure on government officials to agree a package of measures to tackle the impact of rising energy costs on households, small businesses, manufacturers and the wider economy.
Senior government officials from the business department, the Treasury and No 10 are locked in talks with energy companies to devise a set of measures which could help avert a national cost of living crisis.
The proposals include a radical set of plans to stabilise gas market costs by paying money to energy companies when market prices are above a set level and claiming paybacks when market prices fall below this benchmark.
The Guardian understands that the proposal, first reported in the Financial Times, has divided opinion between Treasury officials who are in favour of a plan ambitious enough to prevent an economy-wide inflation crisis, and the business department which has consistently warned against any measure which could be seen as a handout for major energy companies.
“There is nothing that has universal support,” a senior energy executive said. “The costs will ultimately need to be borne by bill payers or taxpayers but there has been some discussion around different mechanisms which could smooth these costs out over a few years rather than all at once.”
Martin Young, a senior analyst at Investec, warned that setting a reference price for the gas market could have unintended consequences including “a kick in the teeth” for plans to discourage gas heating.
“I see it as hugely important that in attempting to solve one problem, that you don’t create another, so without any detail on how a mechanism actually works, it’s difficult to conclude that it’s good for the long-term and doesn’t impede investment, innovation and the pathway to net zero,” Young said.
Ofgem said it was “working closely with government and industry to make sure customers continue to be protected this winter”.