Almost 94,000 energy customers have been left in limbo after two suppliers went bust in the wake of soaring wholesale power costs, raising questions about the resilience of the industry.
PfP Energy - which has around 80,000 domestic customers and 5,000 business customers - is ceasing to trade, as is MoneyPlus Energy, which has around 9,000 domestic customers.
Ofgem, the regulator, said it will choose a new supplier for the two companies' customers under its safety net process. There will be no interruption to customers’ energy supply in the meantime.
Neil Lawrence, director of retail at Ofgem, added that customers’ credit balances will be protected.
The companies are the latest in more than 20 suppliers to have collapsed over the past five years in an increasingly competitive and heavily regulated market.
Pressures are set to continue after wholesale energy prices soared to record levels amid a global gas supply crunch.
Gas is in short supply globally owing to a toxic mix of underinvestment during the pandemic; fields taken offline for maintenance; lower exports from Russia; and rising demand, including in Brazil where a drought has dented hydropower output.
Prices in Britain hit a record 136.6 pence per therm on Tuesday, compared to less than 30p per therm one year ago. Power prices are closely tied to the gas price, climbing to an unprecedented £240 per MwH in Britain on Friday.
This is more than four times their normal level over the latest decade. National Grid ESO, which manages Britain’s electricity supply and demand, asked coal-fired power stations to switch on on Monday morning to help manage demand.
Challenger energy suppliers have poured into the market since 2013 and have stolen more than a quarter of the market from the legacy Big Six suppliers such as British Gas and EDF.
But many have also struggled to cope with volatile wholesale costs and cut-throat competition which has brought many loss-leading tariffs on the market.
The price cap on default tariffs was also introduced in 2019 which limits how much suppliers can pass onto their customers.
The level of the price cap is set to increase by £139 from October to reflect rising wholesale costs, bringing the average dual fuel bill to £1,277.
It is reviewed every six months and is likely to rise further if wholesale costs remain elevated.
Ofgem said: “As in any competitive market, energy suppliers will from time to time fail.
“We monitor suppliers closely to ensure that they are capable of meeting the needs of their customers, and that among other things they fulfil their environmental and social scheme obligations. Where a supplier isn’t capable of doing this, it may need to exit the market.
“More suppliers are coming into the market offering good deals, & have boosted competition and choice for consumers.”