Menu Close

Collapse of UK energy firms could cost each household extra £120

Check credit my

The energy crisis could cost each home in Great Britain an extra £120 to cover the expense of dozens of energy supplier collapses this winter, which would plunge hundreds of thousands of households into fuel poverty for the first time.

Consumers in England, Scotland and Wales could be on the hook for a total of £3.2bn to cover the costs left behind by bust gas and electricity providers, on top of paying for record gas and electricity market prices, according to analysts at Investec.

The bank warned of a “substantial” burden on households to provide a safety net for the customers of bust suppliers, including the largest to go under so far, Bulb Energy, which plunged into a special administration process last week.

“The meltdown in the supply market is likely to see substantial additional costs land on every GB household, hardly welcome when fuel poverty is an issue, inflation is an issue, and commodity costs look set to push energy bills up,” the wealth management group Investec said.

Energy bills had already climbed from an average of £1,138 a year to £1,277 a year from last month under the energy regulator’s price cap, which is used to limit price rises for 11 million homes that pay for a standard dual-fuel tariff by direct debit.

The increase, which has raised concerns among fuel poverty campaigners that hundreds of thousands of additional households will be unable to pay their bills, is expected to be followed by an even steeper price in April.

UK energy suppliers that have gone bust in 2021Note: this table does not include MA Energy (2 November) or CNG Energy (3 November), which supply only non-domestic energy customers.

  My house has gained £30,000 in value. Should I realise that capital and move north?

Credit beureau

The End Fuel Poverty Coalition has estimated that rising gas markets could lead to a rise in the price cap of just over £117 a year. An extra increase of £120 a year to cover the cost of bust suppliers would mean a £237 rise, or an 18.6% increase in bills overall, which would push another 742,364 additional homes into fuel poverty.

Martin Young, an analyst at Investec, said the process of pinpointing a total cost for the energy crisis was “akin to attempting to nail jelly to a wall” but the figure could rise as high as £3.2bn, which would most likely be “mutualised” across the market through energy bills.

This sum includes the cost of handing customers to a new supplier that must then buy extra gas and electricity at current market rates, which are near record highs, and cover any unpaid policy costs left by the bust provider.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

The figure also includes the £1.7bn put up by the Treasury to pay for Bulb to continue supplying gas and electricity through the winter via a special administrator, which may be recouped from home energy bills once the company’s fate is decided.

Simon Francis, the coordinator of the End Fuel Poverty Coalition, said: “This additional financial bombshell could not come at a worse time for households across the country. Yet another drain on household finances caused by energy markets is unacceptable.

“The current system is broken and while long-term reforms are desperately needed, the government also needs to provide far more immediate support for people facing fuel poverty this winter.”