Fears over ‘domino effect’ of energy supplier collapse as gas shipper CNG stops deliveries

·3-min read

Fears are growing that a “domino effect” could result in more energy suppliers going out of business after a key gas wholesaler exited the market.

Pressure continued to mount on government ministers to take action on Thursday to resolve the gas price crisis after three more energy suppliers went bust. Gas shipper CNG, which supplies gas to 18 utility companies, also said it would stop deliveries, prompting fears of a further wave of collapses.

The founder of green energy firm Ecotricity said CNG’s exit could cause wider problems. Dale Vince tweeted: “And one gas shipper, that provides wholesale gas to 18 utility companies, about to exit – that could cause a domino effect.”

CNG told companies it supplies they would need to buy gas from elsewhere. That is likely to mean a sharp rise in costs for retail suppliers and hundreds of small businesses.

The warning came as energy regulator Ofgem sought a new supplier for more than a quarter of a million customers of Pure Planet, Colorado Energy and Daligas, which all ceased trading this week. Around 2 million customers have now been put into Ofgem’s “supplier of last resort process”.

The regulator stressed that customers’ energy supplies would be uninterrupted and credit balances transferred to a new supplier.

Pure Planet, which was backed by oil giant BP, criticised the government and Ofgem for expecting it “to sell energy at a price much less than it currently costs to buy”.

The energy price cap, which sets a maximum amount suppliers can charge on their standard tariffs, rose 12 per cent in October but wholesale gas prices are up several times that amount.

“This is unsustainable and, therefore, sadly we have had to make the difficult decision to cease trading,” Pure Planet said.

The company said it was hedged against energy price rises until spring but it faced large potential losses, which prompted BP to withdraw funding.

There was no sign on Thursday that pressure on suppliers will ease soon, as wholesale gas prices began rising again after falling back from record highs earlier this month.

The latest supplier failures came as Sir Jim Ratcliffe, boss of chemicals giant Ineos, warned that high energy prices would continue throughout the winter and could cause industry to begin shutting down.

Sir Jim said a lack of gas storage in the UK had left the country vulnerable to fluctuating prices.

Appearing on ITV’s Peston, he was asked if the country could shut down due to a prolonged cold spell. He replied: “Yeah, in which case then, what you would do is you’d shut down industry.”

“I think it’s quite difficult to predict how long this sort of current situation’s going to last, but you know I suppose if you were a betting man you’d assume it would probably run through at least through the winter because obviously our gas demand increases in the winter.”

He added gas was “a very strategic and important requirement for the UK economy and they (the government) need to ensure that the UK economy can’t be held to ransom because we haven’t organised our gas situation very well”.

Andy Harris, consultant to energy company Neon Reef, said the energy market was in the middle of a “perfect storm”.

“I think it is a market that is set up to fail and my confidence in (regulator) Ofgem is somewhat diminished,” he told the BBC's Today programme.

“We have a price cap and it’s right that consumers aren’t exposed to extremes and are put in a position where they have bills that they simply cannot afford to pay

“Unfortunately, the solutions that have been put in place by government and Ofgem are such that all of the risk falls onto the shoulders of suppliers

“By definition, then, when you hit a perfect storm as we are in now, it is only the suppliers with the broadest shoulders that are able to absorb those losses.”

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