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U.K. Energy Crisis Ramps Up as Two More Suppliers Colla...



U.K. Energy Crisis Ramps Up as Two More Suppliers Collapse

Electricity transmission towers near Rayleigh, U.K., on Tuesday, Sept. 21, 2021. U.K. Business Secretary Kwasi Kwarteng warned the next few days will be challenging as the energy crisis deepens, and meat producers struggle with a crunch in carbon dioxide supplies. Photographer: Chris Ratcliffe/Bloomberg
By Bloomberg
13 Oct 2021 2

(Bloomberg) --Two energy suppliers with about 250,000 customers have collapsed in the latest escalation in the U.K.’s energy crisis.

By Rachel Morison and William Mathis
Oct 13, 2021, 6:55 PM – Updated on Oct 13, 2021, 8:28 PM
Word Count: 310
BP Plc-backed Pure Planet and Colorado Energy announced they have gone out of business on Wednesday, taking the total number of households that have been forced to switch supplier since the start of August to almost 2 million. Since the start of August, 12 utilities in the country have gone under.

The unprecedented volatility in power and natural gas markets last week has added to pressure already on suppliers as surging prices push them to breaking point. U.K.’s Business Secretary Kwasi Kwarteng warned last week that more suppliers would likely go out of business. The latest failures show that the crisis is still getting worse.

Failing Suppliers
The customers of the two failed suppliers will be transferred to new companies, according to the country’s energy regulator Ofgem. Finding a replacement is becoming more difficult as most of the larger suppliers have already taken on extra customers and say they are stretched as far as they can go without financial help from the government.

U.K. Energy Firms Seek Fund to Absorb Stranded Customers

The price of gas has more than quadrupled this year. Many small suppliers haven’t fully hedged, meaning they have to buy expensive gas and power in the market. At the same time, they can’t pass on most of those added costs to their customers because of fixed contracts and a government price cap for some tariffs.

Rising gas prices are pushing suppliers to collapse
Customers are automatically reallocated through a process known as the supplier of last resort, under which Ofgem chooses another company to provide energy. So far, the process has been working. But if a big supplier fails then the regulator will appoint a special administrator to limit the risk of market chaos created by trying to quickly transfer a large number of customers to another supplier.

(Adds chart after third paragraph)
© 2021 Bloomberg L.P.


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All Comments 2

  • What a joke, out of business due to a short price spike! Were these companies operating without longterm hedged contracts in place? Eskom almost seems competent by comparison.

  • Further proof that Private Enterprise is NOT the magic bullet that solves a country’s grid problems. This “model” of private companies under a regulator’s supervision is flawed. It failed in the US (with Enron) it is currently failing in the UK . . . it is not a stretch to imagine, if this were adopted in SA (with all it’s corruption) that it would be very much worse. Time to try something different. I propose a single institution responsible for the whole grid (from Generation to Distribution – retail) call it ESKOM (it already exists). Remove the regulator, which only gets in the way, but make up the Board of ESKOM with members ELECTED by the stakeholders: Agriculture, Mining, Commerce, Industry, Civil Society, Industry White Collar (experts) and Blue collar (workers). Make it transparent so that ALL board minutes and ALL financial transactions/contracts are available on the Internet. Worth a try, because simply unbundling ESKOM WILL be a disaster, Bruce Danckwerts, CHOMA, Zambia

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