Fears over ‘domino effect’ of energy supplier collapses after wholesaler exits market

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Fears are growing that the ‘domino effect’ could result in more energy suppliers going out of business after a major gas wholesaler exits the market.

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Pressure continued to mount on government ministers to take action on Thursday to resolve the gas price crisis after two more energy suppliers went down. Another 18 firms are considered at higher risk as wholesaler CNG said it will no longer supply gas to retail suppliers.

The founder of green energy firm Ecotricity said the run out of CNG could cause widespread problems. Dale Vince tweeted: “And a gas shipper, which provides bulk gas to 18 utility companies, is about to run out – which could create a domino effect.”


The warning came after energy regulator Offgame sought a new supplier for a quarter of Pure Planet and Colorado Energy’s customers, which both closed business on Wednesday. Nearly two million customers have now been put into Offgame’s supplier of the Last Resort process.

The regulator insisted that customers’ energy supply would be uninterrupted and the credit balance would be transferred to a new supplier.

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Pure Planet, which was backed by oil giant BP, criticized the government and Offgame for expecting it “to sell energy at prices far below the cost of currently buying”.

The energy price cap, which sets the maximum amount suppliers can charge at their standard tariff, rose 12 percent in October, but wholesale gas prices are many times that amount.

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

The company said it was defended against rising energy prices until the following spring, facing large potential losses that prompted BP to withdraw the funds.

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

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

Sir Jim said the lack of gas storage in the UK has left the country vulnerable to price volatility.

Appearing on ITV’s peston, he was asked if the country could be shut down due to prolonged cold, he replied: “Yeah, in that case, what would you do that you shut down the industry.”

“I think it’s quite difficult to predict how long the current situation like this is going to last, but you know I think if you were a betting guy you would have assumed it would probably be at least Will last in winters because obviously our gas demand goes up in winters.”

He added that gas “was a very strategic and important need for the UK economy and they (the government) need to ensure that the UK economy cannot be held up for ransom because we have taken our gas position too far. Not well organized”.

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

“I think this is a market that is set to fail and my faith in the (regulatory) offgame has waned a bit,” he said on the BBC Today programme.

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

“Unfortunately the solutions that have been taken by the government and offgame are such that all the risk falls on the shoulders of the suppliers.

“By definition, when you hit a perfect storm, as we’re doing now, it’s only the broad-shouldered suppliers that are able to absorb those losses.”


Credit: www.independent.co.uk /

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