Energy suppliers’ collapses ‘cost consumers more than a third extra this year’

Local distribution network charges will increase by £34.36 on an average electricity bill, new research estimates

The cost of the energy suppliers’ exits from the market which is felt by customers on their bills is more than a third extra this year, compared to 2021.

That’s according to research by the consultancy Cornwall Insight which suggests the cost to compensate energy companies that take on customers from failed suppliers will increase in average domestic electricity bills by £34.36 in 2022-23.

When a supplier fails, a new supplier is appointed through the Supplier of Last Resort (SoLR) process.

The new supplier is able to recover some costs for taking on these customers and this cost is passed on to the consumer through their bills in Distribution Use of System (DUoS) charges.

Cornwall Insight estimates these additional costs have increased this component of electricity bills by an average of 33.9% in 2022-2023.

It suggests that regions including London and Southern England could see a hike of over 40%.

Two weeks ago, the energy regulator revealed the new price cap that will see energy bills increase by £693 from April.

Although the government announced the Energy Bills Rebate scheme to help customers offset the financial pressure, a recent survey showed that nearly a quarter of Britons had no idea of this support. 

Yesterday, charity National Energy Action warned that an estimated 250,000 households across the UK will most likely lose the chance to join the government loan scheme as support for the rising energy bills.

Laura Woolsey, a Senior Analyst at Cornwall Insight, said: “If we are to protect both consumers and companies in the energy market, we need to see more than short-term fixes, we need long-term reform.

“This includes seriously considering the future of the Default Tariff Cap, which is currently working as a barrier to the success of smaller energy firms and not safeguarding the cost of energy bills.

“Ultimately if more suppliers fail, consumers will be the ones left with the bill.”

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