Power through energy crisis
HARVEY JONES EXPLAINS WHAT IS GOING ON WITH SUPPLIERS IN OUR ENERGY SPECIAL
IF your energy supplier has collapsed, don’t panic – around two million households are going through the same experience.
A string of gas and electricity suppliers have gone bust in recent weeks, with more expected to follow.
A number have stopped taking on new customers.
While regulator Ofgem has found new suppliers for all the affected customers and your heating and lighting should operate exactly as before, this is a worrying time.
Many people locked into cheap deals and fixed-rate tariffs, could end up paying hundreds of pounds more for gas and electricity as a result.
And, the energy price cap increased for the second time on Friday, hitting 15 million households on the lowest tariffs.
What is happening?
Wholesale gas prices have risen fourfold this year, including a rise of 70% in August alone.
One reason is that Putin-backed Russian supplier Gazprom has restricted gas supplies to Europe and, indirectly, Britain, to seal approval for its new pipeline to Germany, Nord Stream 2.
European supplies were already low, after the recent cold winter.
Planned maintenance of nuclear plants, lower energy from renewable wind sources due to calm weather, and the shift away from “dirty” coal have also hit supply.
A fire at one of the UK’s main power import cables in France has made a bad situation even worse.
And now meteorologists say the UK faces the risk of a colder winter than usual this year, driving up demand for gas and keeping prices high through to 2023.
It’s the perfect storm of problems. And the UK is in the eye of the storm because it is heavily dependent on gas imports from abroad, and has little storage capacity after Centrica closed the Rough facility in 2017.
Home energy bills have soared this year, with regulator Ofgem increasing the energy price cap by £96 in April, then £139 this month, taking the average household bill to £1,277 a year – with worse to come.
With gas shortages likely to intensify when we hit peak winter demand, the price cap could rise by another £300 next April, according to the Centre for Economic and Business Research. That would lift the average bill to £1,600 a year.
Who is going bust?
At the start of the year, around 70 energy firms supplied gas and electricity to UK customers. That number is rapidly dwindling, and expected to shrink further as winter looms.
This week Igloo Energy, Symbio Energy and Enstroga all ceased trading. PfP Energy and MoneyPlus Energy ceased trading on September 7, followed by Utility Point and People’s Energy on September 14. Green and Avro Energy were the next to go under, both collapsing on September 22.
A total of 15 gas and electricity have gone into administration since September 2020.
The Flipper website, which automatically switches customers to the cheapest deals, had to close as it could no longer offer big savings as there were not enough low-cost tariffs to choose from.
Gareth Kloet, energy spokesperson for GoCompare Energy, says the record high global gas price and the price cap are forcing providers to supply gas and electricity to customers at a financial loss. Only businesses with very deep pockets can sustain this, Gareth warns.
“While the price cap is a good idea in principle, it’s had the negative effect of driving out competition in the market,” he adds.
One reason smaller suppliers are vulnerable is that they failed to buy gas in advance, leaving them at the mercy of today’s soaring prices.
“We expect to see more smaller energy players pay the ultimate price as the weeks go on,” adds Gareth.
Business secretary Kwasi Kwarteng, said the Government will refuse to bail out “failed companies” and insisted the energy price cap would remain, as it “saves 15 million households up to £100 a year”.
He denied the UK would face winter supply emergencies, with the lights going out and three-day weeks as happened in the 1970s, during the last energy crisis.
What it means for you
First, don’t panic. You will still be able to heat and light your home because energy regulator Ofgem is arranging for suppliers to take over when rivals fail.
For example, British Gas is the new supplier for People’s Energy, PFP Energy and MoneyPlus Energy domestic accounts.
Octopus Energy has taken over from Avro Energy, EDF Energy has taken on Utility Point customers, E.On now supplies HUB Energy and Shell will supply Green customers.
If you pay by direct debit and are in credit, this should be honoured after you have switched over and you will get your money back.
You should still be able to check how much credit you have by logging into your current supplier’s website, but you must contact your new supplier for a refund.
But there are problems if your supplier goes bust. If you have locked into a competitive fixed-rate contract, or any other cheap deal, you are likely to pay a lot more when you are switched to a new supplier.
They are under no obligation to match your current tariff.
This is on top of rising food and petrol costs, the forthcoming cut to the £20 Universal Credit and upcoming increases to tax and National Insurance.
Gillian Cooper, head of energy at Citizens Advice, said the poorest households face a tough winter. “Many people on low incomes risk losing the £140 warm home discount when they’re moved to a new supplier.
“Some customers in debt may see their agreed repayment plans torn up,” she says.
Another problem is that as more suppliers collapse, competition will shrink and force prices up even higher.
While the price cap is good in principle, it’s driving out competition in the market Gareth Kloet, GoCompare Energy
What to do now
If your supplier has gone under, hold tight before shopping around for a better deal, says Kevin Mountford, boss of financial services platform Raisin UK.
“Wait until you know your new supplier. This way Ofgem can continue to protect any credit you have. Check the transfer progress at ofgem.gov.uk.”
Once you know your supplier you can shop around but it could be harder than before, as comparison sites Go Compare and Compare the Market have removed their comparison function.
Instead, compare energy prices direct, through suppliers’ websites.
“Variable tariffs may be cheaper and more plentiful but be warned, your tariff can go up if energy prices continue to rise,” Kevin says.
You should also take a meter reading to give to your new supplier and can cancel your direct debit if you wish.