Why are energy companies going bankrupt? As Bulb enters administration, here’s why UK energy providers are at risk

Bulb Energy has joined more than 20 energy companies exiting the energy market this year, announcing on Monday (September 22) that it would enter administration due to rising wholesale energy prices.

Wholesale gas prices have climbed 250% since the start of 2021 and were up 70% in August alone.

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The energy price cap is expected to remain in place, but household energy bills have risen by around £ 139 per year to reach £ 1,277 for typical gas and electricity customers since 1 October.

But which energy suppliers have gone bankrupt under the weight of rising wholesale gas prices – and why are energy companies going bankrupt?

Here’s what you need to know.

Which gas companies are struggling due to the UK gas shortage? Energy suppliers are at risk of bankruptcy due to the gas ‘crisis’ – and is Bulb one of them? (Image credit: Leon Neal / Getty Images)

Why are energy companies going bankrupt?

Rising wholesale gas costs in the UK have imposed tough trading conditions on many energy suppliers and gas companies who now have to pay higher gas costs than they receive from their customers .

At present, customers of small energy suppliers will pay less for their gas than their suppliers, leaving them little room to cover trading costs and profit.

Small providers are also at greater risk of struggling to stay afloat if they have not committed to hedging.

A general view of the People’s Energy offices at Shawfair Park on September 20, 2021 in Dalkeith, Scotland. The bankrupt company supplied gas and electricity to around 350,000 homes and 1,000 businesses. (Image credit: Jeff J Mitchell / Getty Images)

The costly hedging process allows energy providers to purchase their energy with an insurance layer attached, thereby reducing their exposure to volatile wholesale prices.

But for small independent businesses operating on tight margins, the expenses can often be too high – leaving many such businesses now exposed to soaring gas costs.

As a result, more than 20 companies have already been forced to close their doors due to rising gas prices.

Green energy supplier Bulb energy became the last UK company to go into receivership after struggling to meet the costs of delivering gas to customers at its current tariff.

Prime Minister Boris Johnson opened Bulb’s London headquarters in July, but reportedly called for a bailout in September amid rising wholesale gas prices.

The Financial Times reported that Bulb was in the process of seeking new funding, with a Bulb spokesperson commenting, “From time to time we explore various opportunities to fund our business plans and continue our mission of lowering bills. and CO2 emissions.

“Like everyone in the industry, we monitor wholesale prices and their impact on our business.”

The company’s 1.7 million UK customers have already been hit by price hikes in 2020, as energy companies struggled to cope with the economic impact of the coronavirus pandemic and growing demand for household energy.

In 2020 Bulb, a company already known for its significant losses, recorded £ 63million in losses during the year through March 31, 2020.

Which energy companies have already gone bankrupt?

The companies that have already been placed in receivership due to the rising costs of wholesale gas prices are:

– MoneyPlus Energy (September 7)

– PFP Energy (September 7)

– Popular energy (September 14)

– Service point (September 14)

– Green Supplier Limited (September 22)

– Avro Energy (September 22)

– Enstroga (September 29)

– Symbio Energy (September 29)

– Igloo Energy (September 29)

– Colorado Energy (October 13)

– Pure Planet (October 13)

– Daligas Limited (October 14)

– GOTO Energy Limited (October 18)

– Bluegreen Energy Services Limited (November 1)

– Ampoweruk Ltd (November 2)

– Zebra Power Limited (November 2)

– MA Energy Limited (November 2)

– Omni Energy Limited (November 2)

– CNG Energy (November 5)

– Social Energy Supply Ltd (November 16)

– Neon Energy Limited (November 16)

– Bulb Energy (November 22)

The fall of Midlothian’s gas company, People’s Energy, put nearly 500 company jobs in the region at risk.

What did the CEO of Octopus Energy say about the UK’s energy problems?

Octopus Energy is one of the UK’s largest energy companies expected to survive the current problems plaguing the energy market.

The relatively young energy company, founded in 2015, has almost two and a half million customers in the UK, serving one in 10 households in Scotland.

Octopus founder Greg Jackson told Sky News on Monday that customers need not worry about a supply disruption.

Mr Jackson said “clearly there will be no disruption in the supply, and customers can sit on it” and stressed the need to “stay calm and resolve” the issues that plague currently the gas market.

The founder also took to Twitter on Monday to say that talk of a UK gas “crisis” could empower the Big Six.

“Make no mistake – there are real energy problems caused by global gas and the UK nuclear weapons shortages – but the idea of ​​’crisis’ is being encouraged by the old Big 6 so to try to convince the government and the regulators to restore the oligopoly comfort that they used to enjoy ”, Mr. Jackson tweeted.

“Without a doubt, there are some silly companies that offered low prices when the market was low, and are looking for a bailout now that it’s high,” he continued.

“They don’t deserve a place in a critical market.

“And the [Big Six] usually overcharged for their operations inflated by opaque prices.

UK Business Secretary Kwasi Kwarteng said the UK government would not bail out “failed businesses” and, in a joint statement with Ofgem, said “the top priority must be continued support for energy customers , especially the elderly and vulnerable “.

What happens if my energy supplier goes bankrupt?

If your energy supplier is forced to shut down due to the impact of gas prices and shortages in the UK, you have nothing to do.

Your supply will not be interrupted and if you are already moving to a new supplier, the change will continue as normal.

UK energy regulator Ofgem will take action to appoint a new company to take over customers from an existing company should it go administrative.

For example, the decline of People’s Energy led Ofgem to appoint British Gas to take over the company’s thousands of customers.

Additional reports by the PA

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