Business Secretary Kwasi Kwarteng is holding crisis talks with industry bosses including Centrica and E.On on Monday, but smaller suppliers are at risk of ruin after price hikes mean they are struggling to supply energy at the low tariffs promised to customers.
The price of wholesale gas has surged by 250 per cent since the beginning of the year, with 70 per cent added since August alone, according to figures from Oil & Gas UK.
The rise in gas prices has been blamed on high global demand, maintenance issues, less supply from Russia, and lower solar and wind energy output.
A former head of regulator Ofgem warned Britain is likely to face high energy prices for the rest of the year.
Why are companies struggling?
There are a number of contributing factors; the economy is opening up from its pandemic lows causing an increase in demand for gas, while Europe will soon enter its winter months when gas demand will be highest, especially in countries such as the UK which overwhelmingly relies on gas to heat homes.
But a perfect storm of further problems has also hit the sector. Supply from Russia has dried up recently, and demand is high in Asia, which is putting pressure on international markets.
In the UK, several gas platforms in the North Sea have closed to perform maintenance that was paused during the pandemic.
Cables that import electricity from France were also damaged last week, and September has not been a very windy month, meaning there has been less wind-power production, creating a need for more gas to produce electricity instead.
Which companies are at risk?
A handful of smaller energy companies appear to be in a desperate situation, as many have not protected themselves against the potential impact of rapidly increasing prices.
Companies that have insured themselves are now cashing that in, leaving them vulnerable to further shocks in the future.
Four smaller firms have reportedly asked larger companies to bid to take over their supply to one million customers, according to the BBC.
Utility Point and People’s Energy went bust last week – a week after PfP Energy and MoneyPlus Energy ceased trading.
The outlook is “looking bleak” for small energy firm Green, its chief executive has said on Monday.
Peter McGirr told BBC Radio 4’s Today programme: “I feel that without any support mechanism being put in place by Government, it’s unlikely we will see the winter through.”
He said “the outlook is looking bleak” with current events in the market, including continued rising prices and the shortage of gas.
Mr McGirr added: “We just don’t have as deep pockets to keep going through this crisis. I think that all suppliers are feeling the pinch of this but some of them just have a lot deeper pockets to try and ride out the storm.”
The company, with 1.7 million customers, is reportedly working with investment bank Lazard to shore up its finances.
What happens if my supplier goes bust?
Ofgem will move people to a new supplier if their energy firm goes bust. People should take pictures of their meters and download or print out bills from the old supplier, however.
If Ofgem moves you to a supplier or a deal you are not happy with, you can then shop around.
If your energy supplier owes you money, your money is protected and you should get it back.
Other than this you will not have to do anything. Ofgem will automatically move you to a new supplier. This might take a few weeks, but your new supplier will contact you when it is sorted.
In the meantime, you can continue to use your gas and electricity as before in the meanwhile.Internet Explorer Channel Network