Millions of customers in the UK have already been hit by the collapse of energy suppliers as gas prices soar.
Avro Energy and Green were the first suppliers to the wall on Wednesday as smaller suppliers face a reckoning. Some 830,000 combined customers will face being switched to a potentially more expensive provider.
Customers on those suppliers will still receive energy while Ofgem, the industry regulator, finds new providers.
Together the suppliers represent a share of 2.9% of domestic customers in the market — Avro Energy 2% and Green 0.9%.
“Ofgem’s number one priority is to protect customers. We know this is a worrying time for many people and news of a supplier going out of business can be unsettling,” said Neil Lawrence, director of retail at Ofgem.
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Alongside Avro and Green, People’s Energy, Utility Point, PfP Energy and MoneyPlus Energy ceased trading in September, as prices began to rise. Their combined customer base totals around 1.5 million, according to Ofgem.
Wholesale prices for gas have surged 250% since January, which is having a dramatic knock-on effect.
Reasons behind the dramatic increase in power prices include low gas reserves, strong commodity and carbon prices, heightened global demand, and low wind output.
There are growing concerns about how the worst off in the UK will be able to afford bills this winter, if the price rise is sustained. Pressure is ramping up on the government to provide financial support for households anticipating an £139 ($190) increase in bills next month.
Politicians from both sides of the bench have argued that this, combined with the discontinuation of the £20 universal credit uplift and rising inflation could push the UK into a cost of living crisis.
Yesterday, in a committee hearing on the issue, business secretary Kwasi Kawrteng said the government would not move to prop up failing energy companies. He said he didn’t want to go back to a “cosy oligopoly” where the market was uncompetitive.
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Kwarteng added that it was difficult to put a figure on how many firms would go out of business, saying: “We are going to want to have a ‘lessons learned’ after this.
“It’s not unusual for suppliers to go out of the market. I think what is different this time is that dramatic change in the costs that those suppliers are facing.
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