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Four more energy companies at imminent risk of collapse

·3-min read
A view of an electricity pylon in Cheshire - Peter Byrne/ PA
A view of an electricity pylon in Cheshire - Peter Byrne/ PA

Four more energy suppliers are in line to collapse amid soaring wholesale gas and electricity prices, leaving thousands more households facing higher bills.

A string of companies are on the brink of failure as crisis grips the energy market, according to Sky News, with talks underway with Ofgem, the industry regulator. Failures could be announced as soon as this morning.

It would bring to 13 the number of suppliers that have failed since the start of September, with more likely to follow over the winter as turmoil grips the market.

Wholesale gas prices have climbed about six-fold over the latest year due to a global crunch on gas supplies, with companies unable to pass on costs to customers immediately due to the price cap on energy bills.

Under the regulator's safety net, customers of failed companies are moved on to surviving companies, where they are typically put onto the new supplier's default tariff.

In the current climate this is likely to be higher than their previous deal. The price cap, which covers default tariffs, rose by 12pc on October 1, adding an average £139 to take the average dual fuel bill to £1,277.

At least four companies are in talks with Ofgem about their customers being scooped up under the safety net process, Sky News reported yesterday.

The companies are thought to be relatively small, but the failures will nonetheless affect hundreds of thousands of households.

That would be on top of the 1.7m customers orphaned by the companies to have collapsed so far since September:

Those to have collapsed so far are Enstroga, Igloo Energy, Symbio Energy, MoneyPlus Energy, PfP Energy, Utility Point, People’s Energy, Green Supplier and Avro Energy.

The energy market has expanded rapidly over the latest decade, with challengers stealing about a quarter of the market from the so-called Big Six. About 50 suppliers were in the market as of the start of the year.

There is growing concern among stronger companies about whether they can afford to take on new customers, given the huge wholesale costs of energy. They are able to recoup these costs eventually via an industry levy which is ultimately paid for by household bills.

Natural gas prices have been climbing for months due to a global supply crunch triggered by factors ranging from lower output in the North Sea, higher demand in Brazil and Asia, and constraints on supply in Russia.

Last week Vladimir Putin said Russia stood ready to help stabilise markets and could export record volumes of gas this year. He asked his Government for proposals on how to stabilise energy markets.

MEPs have called on the EU to investigate Russia's role in the crisis amid concerns Moscow is withholding supplies to increase pressure on Germany over Nord Stream 2, something the Kremlin denies.

Analysts have questioned whether Russia has the capacity to send more despite Mr Putin's remarks, given its own production outages, domestic demand, and contracts with Turkey and China.

One turning point could come at the start of November, when Russia's timeframe for filling up its own gas storage sites ends and it may have more supply to send to other markets.

Ofgem declined to comment.

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