The record energy market surge has claimed its first casualties after two UK suppliers collapsed leaving almost 100,000 customers without an energy supplier.
PfP Energy and MoneyPlus Energy both ceased trading as the the UK’s gas market reached a fresh record high on Tuesday while electricity market prices surged to highs not seen since 2008.
A string of similarly small suppliers are expected to collapse this winter as the companies shoulder the heavy costs of higher market prices before the cap on standard energy tariffs lifts from October.
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On Tuesday, UK gas prices reached a fresh record high of 136.68 pence per therm, according to commodity market experts at ICIS. Meanwhile, electricity prices climbed to £128.13 per megawatt-hour, for the first time in 13 years.
The historic electricity price highs were bolstered by a strong demand for gas-fired power and a slump in wind speeds that has curtailed renewable energy generation this week.
The electricity system operator was forced to ramp up coal plants to meet 5% of the power demand in England, Scotland and Wales, the biggest reliance on coal power since the unseasonably cold weather in March, despite balmy weather and relatively low electricity demand.
The UK’s fast-rising energy markets mean millions of UK households will face some of the steepest energy bills in the last 10 years this winter, and smaller energy suppliers will run the risk of going bust as they struggle to control costs.
PfP has left 80,000 domestic customers, and 5,000 non-domestic customers without an energy supplier, and MoneyPlus has left about 9,000 domestic customers.
The industry regulator, Ofgem, will choose a new supplier for all the customers affected by the collapse in the coming days while households and businesses receive gas and electricity as normal.
Tom Lyon, a director at Energyhelpline.com, said: “It is a tough market for suppliers with the wholesale cost of energy continuing to rise, forcing suppliers to operate on smaller margins and many have been affected by customers either having to delay or miss payments due to lockdown.”
In addition to shouldering the rising cost of energy, UK suppliers also face an annual deadline to hand over millions in renewable energy subsidies collected from bills to pay renewable energy developers.
The annual 31 August deadline has proved fatal to small suppliers in the past. Those that miss it have until the end of October to meet a late payment deadline, plus penalty charges, before the regulator begins the process of stripping them of their supply licence.
Martin Young, an analyst at Investec, said about 1.75m customers have been forced to change suppliers involuntarily following a company collapse since the beginning of 2018, due to the “tough backdrop in supply”. He expects more suppliers to crash out of the market or sell their customers to rivals to avoid going under.