Energy firm failures 'will cost all households £100', warns British Gas boss

Asia's Tech News Daily

The average household faces paying an extra £100 a year for energy to help foot the bill for 16 firms that have collapsed, the boss of the country’s biggest supplier has said.

Chris O’Shea, chief executive of Centrica, the British Gas owner, warned customers will find themselves paying between £100 and £200 more – whether their supplier has gone bankrupt or not.

Sixteen energy suppliers serving 2.5million households have collapsed so far this year, with 14 going bust since the end of summer as wholesale gas prices have soared.

Controversial O’Shea, who sparked a fire and rehire war on workers earlier this year, said that the charges were “regressive” and would pile more pressure on the poorest households, which are already struggling to keep up with the cost of living.

O’Shea told a House of Lords select committee yesterday that these failures had left behind £2.5billion in costs that would be recouped from all households over the course of 2022 and 2023, at a total cost of at least £100 per household.

Energy firm failures 'will cost all households £100', warns British Gas boss
© PA O’Shea told a House of Lords select committee that the energy sector has a £2.5billion black hole because of 16 suppliers that have gone bust

“The current retail market failures will put £100 on the bill of every single home in the UK, whether it’s a house IN Belgravia or a studio flat in a deprived area of Glasgow,” O’Shea said.

“It’s not unreasonable to expect that to double in the next few weeks; Ofgem have been quite clear that they expect many more suppliers to go out of business.”

When energy companies fail, their customers are transferred to another supplier issued under Ofgem’s Supplier of Last Resort scheme.

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This new supplier then charges them the maximum allowed under the government’s energy price cap, at £1,277 a year for a typical household.

The new supplier must shoulder the switch and any other costs they incur, such as for honouring customers’ credit balances, although can then claim back any excess costs from an industry-wide levy that is ultimately funded by all households on their energy bills.

But Chris O’Shea said the cap is putting too much pressure on firms that are struggling to shoulder the costs of wholesale gas.

He said while the latest cap increase added around £139 to the average household, it is significantly below what firms are paying for wholesale gas in real terms.

Gas prices have jumped 250% in the past year and the energy price cap is set six months in arrears – meaning the latest rise reflects market increases in February this year.

Next April it will rise in line with the latest increase – a move that could add another £300 to annual bills.

O’Shea said: “The maximum price you can put these customers on is the price cap. The difference between a new customer coming in on the price cap and buying the gas and electricity in the market is about between £700 and £1,000, for this winter alone.”

Ian Barker, managing partner of BFY Group, a management consultancy, estimated that if £2.5 billion of costs from supplier failures were recouped from this levy, the price cap could increase to “more than £1,800” a year from April.

The Chancellor has already ruled out plans to suspend VAT on energy bills in his Autumn Budget to protect households struggling to keep up with bills.

He could instead choose to extend the Warm Home Discount scheme to allow more people to benefit, or increase it from its current £140.

The winter fuel payment could also be increased. The amount has been frozen for years, but there is precedent as the government previously introduced a temporary uplift of £50 in 2009-11, although this was under Labour.

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