Energy companies are facing tough decisions amid the 2021 rise in wholesale gas prices.
No fewer than seven UK suppliers have now gone bust in recent weeks with industry experts predicting another handful could go under by the end of September.
The increase in gas prices has been initially shouldered by suppliers with the government’s energy price cap protecting consumers from taking on the financial strain.
But with the market price cap set to rise in October to a maximum £1,277 a year - an increase of 12% - and a further review in six months’ time, consumer tariffs are expected to rise.
Though not every energy company will be able to survive the immediate cost, with smaller energy firms and some middle sized suppliers said to be at risk of going bust.
Here’s what you need to know about rising gas prices, those companies at risk, others that have gone bust and if Avro Energy will be one of those suppliers in trouble.
Is Avro Energy going bust?
Avro Energy was launched in 2015 to challenge ‘the big six’ suppliers in the UK.
It supplies gas and electricity to around 580,000 domestic customers and is one of the larger energy companies outside of the traditional heavyweights in the UK market place.
On 14 September 2021, industry regulator Ofgem issued Avro Energy with a provisional order to provide financial information "relating to the company’s activities".
Ofgem stated it had asked Avro for the information on 19 August and warned that failure to provide the information could result in the firm losing its licence to operate.
And on 22 September Ofgem confirmed Avro had ceased trading, along with Green Supplier Limited.
Neil Lawrence, director of retail at Ofgem, said: “Ofgem’s number one priority is to protect customers. We know this is a worrying time for many people and news of a supplier going out of business can be unsettling.
“I want to reassure customers of Avro Energy and Green Supplier Limited that they do not need to worry. Under our safety net we’ll make sure your energy supplies continue. If you have credit on your Avro Energy or Green Supplier Limited account this is protected and you will not lose the money that is owed to you.
“Ofgem will choose a new supplier for you and while we are doing this our advice is to wait until we appoint a new supplier and do not switch in the meantime. You can rely on your energy supply as normal. We will update you when we have chosen a new supplier, who will then get in touch about your tariff.
“Any customer worried about paying their energy bill should contact their supplier to access the range of support that is available.”
Which energy suppliers are at risk of going bust?
It remains unclear whether or not the recent rise in wholesale gas prices is the reason behind Avro’s decision not to supply financial information to Ofgem.
However, there are companies reportedly at risk of going bust as the industry grapples with the hike in the wholesale price of gas, which threatens to reshape the market place.
Bulb Energy is said to be seeking a bailout while Utility Point, People’s Energy, PFP Energy, MoneyPlus Energy and HUB Energy have all ceased trading since August.
Under Ofgem rules energy supplies will continue to affected customers of all five firms while their accounts are transferred to a new supplier.
EDF Energy has taken on Utility Point customers, while British Gas is the new supplier for People’s Energy, PFP Energy and MoneyPlus Energy accounts. E.On is the new supplier to HUB Energy accounts.
Why are gas prices rising?
According to data gathered by industry group Oil & Gas UK, wholesale gas prices have risen 250% since January 2021 and 70% in August alone.
An imbalance between supply and demand has seen the price of gas skyrocket.
There is a high global demand for gas, with the UK’s needs increasing as the colder weather set in through the winter months, while a shortage of supply.
Planned maintenance, reducing the nuclear power outage of the UK by a fifth, as well as lower solar and wind renewable energy generated has also contributed.
At the moment, companies are shouldering that financial burden due to the government’s energy price cap which limits the cost firms can pass on to its customers.
Yet the cap is set to rise by £139 a year, from £1,138 to £1,277 a year, starting from 1 October 2021 and will be reviewed again by Ofgem in six months’ time.
What’s being done about rising gas prices?
As the larger energy suppliers take on extra accounts from those companies to have gone bust, the government continues to hold talks with industry leaders.
Business secretary Kwasi Kwarteng said the government won’t bail out "failed companies" and stated the energy price cap, "which saves 15 million households up to £100 a year", will remain.
But there could be government support for larger firms taking on new accounts from the energy companies to have gone bust, Mr Kwarteng said.
"Any support for those larger companies will be in terms of working capital, will be a loan, it won’t be just a grant, it won’t be just a blank cheque," he told the BBC.
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