Multiple households stand to lose their energy supplier this winter as small companies witness record highs on the UK gas market, and a looming deadline to hand over renewable energy subsidies at the end of the month. Equity analyst at Investec, Martin Young said a “combination of many” factors could lead companies to fail or become the target of an opportunistic acquisition by a larger rival.
The energy regulator is monitoring the finances of companies amid concerns that a slew of small suppliers could shut down later in the year. Young said unexpectedly high gas prices could compound the difficulty of meeting a payment deadline of August 31 to hand over money collected from bills to pay renewable energy developers for their clean electricity. Suppliers that fail to pay in August have until the end of October to meet a late payment deadline, plus penalty charges, before the regulator begins the process of stripping them of their supply license.
Young said he expected “consolidation” within the energy industry over the upcoming months through “supplier failures and/or distressed sales” as companies find themselves struggling to meet their debts.
Gas prices in the UK markets have soared by about 80 per cent this year to surpass 16-year highs and could continue climbing into 2022. The energy regulator is expected to respond to the market surge by raising the maximum cap on default energy tariffs by more than 13 per cent, or at least £150 a year, from October.
An Ofgem spokesperson was quoted by a media report as saying that the regulator is “proactively” monitoring supplier finances and that suppliers were actively encouraged to engage with it at an early stage if they get into financial difficulty. They said, “In the event of a supplier failure, Ofgem's safety net makes sure that customers stay connected while protecting domestic customers' credit balances.”
