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Energy firms’ collapse hits 1.5 million customers

Nearly 1.5 million customers have been affected by energy firms collapsing under soaring gas prices.

Avro Energy and Green ceased trading on Wednesday and their 830,000 combined customers face being switched to a new, potentially more expensive, provider.

All affected customers will still receive energy while a new supplier is appointed by watchdog Ofgem.

Green’s boss, Peter McGirr, told the BBC he had done nothing wrong and said bigger firms would soon face problems.

Mr McGirr predicted: “You will see larger suppliers feeling the pain as well and they will come cap in hand for a bailout.”

He criticised the government for supporting US fertiliser firm CF Industries to restart its fertiliser factory, which produced carbon dioxide used in the food industry as a by-product, while allowing energy firms to fail.

Its closure had raised fears over food supplies and the nuclear industry.

“Why do they need a bailout and we don’t?” he asked.

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He apologised to staff and customers, but said: “I don’t think we did anything wrong as a supplier.”

Small business minister Paul Scully told the BBC that the government had not treated CF Industries and Green in the same way because there were “different solutions to different problems”.

He said there was “a mature system” in place to deal with the collapse of energy firms, “protecting customers both in continuity of supply and prices”.

System ‘robust’

Mr McGirr’s comments came amid signs of a change of direction in government policy on the energy crisis.

BBC business editor Simon Jack says that while the government had been talking of state-backed loans for larger energy firms, that idea is now “very much on the back burner” and its intention is to “tough this one out”.

The BBC has been told that ministers believe the current system for managing the failure of energy companies is “robust” and insist it has been stress-tested.

Business Secretary Kwasi Kwarteng is having daily calls with the chief executive of Ofgem to monitor which firm might be next, a government spokesperson said.

It is not yet clear which supplier will take on the 580,000 customers from Avro Energy, the biggest firm to fail so far. Regulator Ofgem has also not yet appointed a new provider for Green customers either.

Neil Lawrence, director of retail at Ofgem, said its “number one priority is to protect customers”.

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The regulator’s price cap also limits how much firms can charge.

But providers have complained that they are unable to pass on rising costs to customers because of the cap on energy bills.

Since wholesale gas prices have started to spike, a number of firms have collapsed.

People’s Energy, Utility Point, PfP Energy and MoneyPlus Energy ceased trading in September.

These smaller companies, including Avro Energy and Green Supplier Limited, account for more than 5% of the UK energy market – about 1.5 million customers.

Firms that have gone bust chart

Ofgem’s Mr Lawrence said: “We know this is a worrying time for many people and news of a supplier going out of business can be unsettling.”

He reminded customers of the failed companies that the regulator would be appointing a new supplier for them and suggested that it is best not to try to switch in the meantime.

The energy regulator’s boss did, however, warn on Wednesday that other suppliers may face a similar fate.

“We’ve already seen hundreds of thousands of customers affected, that may well go well above that. It’s very hard for me to put a figure on it,” Jonathan Brearley said in front of the Commons cross-party business committee.

He would not say if the number of customers that would eventually need new suppliers could run into “millions”.

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Gas hob

What happens if your energy supplier goes bust?

  • Customers will still continue to receive gas or electricity even if the energy supplier goes bust. Ofgem will move your account to a new supplier, but it may take a few weeks. Your new supplier should then contact you to explain what is happening with your account
  • While you wait to hear from your new supplier: check your current balance and – if possible – download any bills; take a photo of your meter reading
  • If you pay by direct debit, there is no need to cancel it straight away, Citizens Advice says. Wait until your new account is set up before you cancel it
  • If you are in credit, your money is protected and you’ll be paid back. If you were in debt to the old supplier, you’ll still have to pay the money back to your new supplier instead

Lisa Barber of consumer rights group Which? said that millions of people may be feeling apprehensive because of speculation that other small companies could fold in the coming days and weeks.

Igloo, for example, has said it is working with restructuring consultants Alvarez & Marsal, although it told the BBC it had not appointed administrators. Bulb, the UK’s sixth largest energy company with 1.7 million customers, is also seeking additional financing.

Ms Barber said: “Ofgem will appoint new energy suppliers to take over and protect any credit customers have so they can be reassured they won’t be cut off or lose their money. We’d recommend taking a meter reading as soon as possible to ensure the transition is as smooth as it can be.”

Dame Claire Moriarty, chief executive of Citizens Advice, told the BBC there had been a big increase in people seeking their help, with 30,000 people checking their energy advice pages online in recent days.

“We’re seeing people come to us because they’re seeing family finances being really squeezed,” she added.

Smaller providers launched in recent years have been overwhelmed by a spike in the cost of wholesale gas prices as economies have reopened from lockdowns and high demand from Asia pushed down supplies to Europe.

Gas prices are rising all across Europe, but Britain has also been affected by lower winds than usual – denting renewable energy supplies – as well as a recent fire at a National Grid site in Kent.

In the UK, firms had already been hit by a jump in costs even before the recent spike. From more than 70 suppliers in 2018, there are just over 30 now.

Industry sources fear there may be as few as 10 suppliers left by the end of the year.

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Ofgem has previously acknowledged that the cost of protecting customers from failing energy providers could lead to higher bills.

Customers on some tariffs are protected from sudden hikes in wholesale gas prices through the energy price cap, which limits how much firms can charge per unit of gas.

The price cap covers 15 million households across England, Wales and Scotland.

www.bbc.co.uk

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