It’s easy to forget, with everything that’s happened since March 2020, that troubled retail energy suppliers have actually faced existential challenges for quite some time. Almost three years have passed since Economy Energy collapsed, affecting 235,000 domestic customers and owing many over £300.
In more recent months, soaring energy prices were clearly dangerous for suppliers which had agreed to sell energy at less than the price it still costs them to buy it. Unlike many other countries, the UK has a price cap for consumers. This means providers cannot increase prices for variable-rate contracts in order to stop their losses.
There are 36 suppliers left in the UK after the collapse of 25 such businesses in the last three months alone. In one of the largest, the fate of another 1.7 million Bulb Energy customers is yet to be decided by a special administrator, which was appointed to handle the large-scale collapse.
Remaining suppliers take note: regulator Ofgem and the Insolvency Service are, together, putting energy customers and their continued supply first – especially those in credit at the time of collapse – not least because the cost of managing each supplier collapse will in itself increase energy bills this winter.
Tougher regulatory stress tests loom for suppliers to prove they have the financial strength to cope with yet higher energy market prices.
Buchler Phillips is able to work with suppliers’ management teams to assess and improve financial viability as a ‘new reality’ dawns for operators in this tough sector.