Yahoo Finance Energy crisis: Entice Energy and Orbit Energy latest firms to collapse
Another two UK energy suppliers have collapsed into administration, taking the total number of failures to 25 since August.
Mansfield-based Entice Energy and London supplier Orbit Energy have become the latest victims of the rapid rise in gas prices in recent months. Energy regulator Ofgem said new suppliers would be found for the two companies' customers.
Last week, Ofgem ordered five energy suppliers to pay what they owe into a scheme to support small-scale renewable energy production, or risk having their licences removed.
It was confirmed that Orbit missed the largest payment of more than £451,000 ($600,565), while another four suppliers owed between £19,000 and £47,000, one of which included Entice.
Industry experts have forecast the number of suppliers in the market to fall to just 10 by Christmas. That compares to 71 in January this year.
Matt Howard, partner at accountancy firm Price Bailey warned on Wednesday that a further 11 firms are at maximum risk of failing.
“This time next year we will have far fewer suppliers and higher household energy bills,” he said. "Every time a supplier goes bust the costs of the remaining suppliers increase, which makes those businesses more vulnerable.
Read more: Gas price crisis: UK government to take action as energy companies warn of collapse
Just this week Bulb, which has around 1.7 million customers and is the seventh-largest energy firm in Britain, announced that the firm would be placed into administration.
Due to its size, energy regulator Ofgem has applied to put Bulb into special administration, meaning if the application is successful it will be run by administrator Teneo until a potential buyer is found, or until its customers leave.
Normally Ofgem would let a firm fail and move its customers onto a new supplier.
For now, Bulb is continuing to serve consumers despite the insolvency. Customers have been told that they do not need to do anything, and that there will be no change to their energy supply and credit balances.
Energy suppliers have not only been affected by a spike in prices but a price cap on what they can charge customers, meaning energy has been sold for less than they bought it for. This cap is currently £1,277 a year on average and is set by Ofgem.
Reasons behind the dramatic increase in power prices include low gas reserves, strong commodity and carbon prices, heightened global demand and low wind output. Electricity prices were up 19% between October 2020 and 2021, and gas prices up 28%.
"The energy price cap isn’t going to protect us from soaring energy costs, because we’ll all end up paying the price eventually," Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said.
"Energy prices have climbed spectacularly, and while they've dropped slightly from October’s peak, wholesale gas is now four times as expensive as it was at the start of this year. Right now, anyone whose supplier is still operating is either protected by a fixed tariff, or by the energy price cap, but we’ll still pay the price."
Read more: Ofgem to put energy supplier Bulb in special administration
She added: "To make matters worse, these collapses are costing energy companies money, which they recoup through an industry fund. That fund is paid for through our bills, and Centrica estimates that this alone could add £100 to our mounting costs."
Bulb, which is three times larger than any other firm that has failed so far, is being given £1.7bn from the UK government to continue supplying energy to customers. This equates to around £1,000 per customer.
Teneo has estimated that it will cost around £2.1bn to keep Bulb trading until the end of April next year, however, business secretary Kwasi Kwarteng is able to provide more money for the company if required.
Lisa Barber, Which? home products and services editor, said: “This move should provide reassurance to any of Bulb's 1.7 million customers who may have been concerned about the collapse of their provider.
"We recommend Bulb customers to do nothing and wait for more information about the special administration process. Its customers will continue to see their bills limited by the price cap, which is likely to be the best deal for them at the moment. If you have already arranged to switch to or from Bulb, this will continue as planned.
It also comes as Britain’s energy regulator has set out plans that would allow it to more frequently adjust a price cap that limits electricity and gas bills for more than 15 million households.
