The crisis in the energy sector in the United Kingdom does not stop, now shaken by the collapse of two other supplier companies with about 250 thousand customers. On October 13, BP Plc-funded Pure Planet and Colorado Energy announced they had gone out of business, bringing the total number of households that have been forced to switch suppliers since the beginning of August to nearly two million. Since the beginning of August, 12 companies operating in the field of supply of electricity and gas services have declared bankruptcy.
In recent days, UK Economic Affairs Minister Kwasi Kwarteng warned last week that a growing number of suppliers would likely go out of business. The latest failures show that the crisis is still getting worse.
The customers of the two failed utility companies will be transferred to new companies, according to the UK’s Energy Regulatory Authority, Ofgem. Finding a replacement is becoming increasingly difficult as most of the larger suppliers have already taken on large numbers of new customers from failed companies, reaching the limit of their absorption capacities without government financial help.
In the UK, the price of gas has more than quadrupled this year. Many small suppliers have not fully hedged themselves against the risk of rising prices, which means they have to buy expensive gas and electricity on the market. At the same time, they cannot pass on most of these additional costs to their customers due to fixed contracts and a government cap on some rates.
Upon bankruptcy, customers are automatically reallocated through a process known as supplier of last resort, whereby Ofgem indicates the mandatory takeover of another company to ensure the supply of energy to the users involved. So far, the process has worked. But if a large supplier fails, the regulator will appoint a special administrator to limit the risk of market chaos created by trying to quickly transfer large numbers of customers to another supplier.