Energy firm collapses to cost customers up to £2.4bn

Ofgem has warned that customers could face a potential bill of billions from the collapse of more than 30 suppliers

Big Zero Report 2022

Customers who have seen their energy firm collapse amid soaring gas prices could face an additional cost of billions after the exit of more than 30 companies from the market since the start of 2021.

Ofgem has given written evidence to the Business, Energy and Industrial Strategy Committee stating that energy providers could receive up to £2.4 billion for taking on the customers of firms that have collapsed.

The claims of the energy firms, which are the direct result of the activation of the Supplier of Last Resort (SoLR) process, represent a cost that will be recovered from customers’ bills.

The finding is part of the committee’s inquiry into energy pricing and the future of the energy market.

During the hearing, MPs were also told that some of the most energy-intensive businesses are currently highly exposed to Gazprom.

Gillian Cooper, Head of Energy Policy at Citizens Advice told the committee: “We need to move to a world where the costs of failures are not fully borne by energy bill payers. We have estimated that the costs of all these energy supplier failures is going to cost in excess £2.4 billion.

“That is about £94 per household. And that does not include the cost of the failure of Bulb which is being treated separately under the special administration regime.”

Last week, the Business, Energy and Industrial Strategy Committee wrote to Business and Energy Secretary Kwasi Kwarteng asking if the government ignored advice from energy industry experts that would have allowed nationalised energy firm Bulb to hedge the cost of fuel.

A few days ago, researchers warned that volatile prices are here to stay and will continue into 2030 if the current energy strategy will not be reformed.

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