An unprecedented surge in gas prices will force more energy suppliers out of business leaving “well above” hundreds of thousands of customers in limbo, the head of energy regulator Ofgem has warned.
“Have a look at the change in the gas price – it really is something that we don’t think we’ve seen before at this pace,” Jonathan Brearley told MPs on the Business, Energy and Industrial Strategy Committee.
He declined to give an estimate on numbers of firms that might go bust but said: “We do expect more [suppliers] not to be able to face the circumstances we’re in.”
He said: “We do expect a large number of customers to be affected, we’ve already seen hundreds of thousands of customers affected, that may well go well above that.
“It’s very hard for me to put a figure on it.”
The warning came amid a deepening crisis for UK energy suppliers who have been hit by a 250 per cent jump in the cost of gas this year. Sharply rising demand as the world has emerged from the pandemic has combined with a host of factors restricting supply.
An unusually cold winter left stocks low and a lack of wind has meant the UK relied more on gas than in previous years. Russia has provided less gas to Europe in a move that many believe is designed to exert its power over EU countries blocking the opening of the long-awaited Nord Stream 2 pipeline.
The UK is more heavily reliant than its European neighbours on gas but ministers have allowed storage facilities to be closed down in recent years.
Suppliers are not able to pass all of the rising costs on because many customers are on fixed-rate deals which have yet to expire and the government caps the maximum level that consumers can be charged for energy.
On Wednesday, Ofgem ordered five suppliers to pay their bills for a government scheme that funds renewable energy.
The suppliers, Colorado Energy, Igloo Energy Supply Limited, Neon Reef Limited, Whoop Energy Limited and Symbio Energy owe £765,000 in total.
“If the suppliers fail to comply with the order made against them, Ofgem may take further enforcement action and they could end up having their licences revoked or facing a financial penalty,” Ofgem said.
Sky News reported that Igloo is on the brink of collapse, having called in insolvency specialists Alvarez and Marsal to review its options.
Customers of companies that go out of business will be transferred to other suppliers, along with any credit they have with their current provider. However they may have to pay more for their energy.
The government has sought to play down fears that UK energy supplies were at risk and blackouts could be in store this winter.
Igloo has been contacted for comment.