UK Power Suppliers Halt Adding New Customers As Energy Crisis Worsens
There’s a growing risk that a bankruptcy wave of power providers is nearing as several small firms stopped accepting new customers Tuesday amid a worsening energy crisis, according to Bloomberg.
Ampower, Green, Igloo, NEO, and Utilita Energy posted notices on their websites earlier today that they weren’t accepting new customers. This comes as several weaker rivals have already gone bankrupt as natural gas and power prices surge to record levels, leaving power suppliers who sold energy at lower prices underwater.
We noted Monday, out of the 55 or so power suppliers, only six to ten will be left standing after the smoke clears. So far, five have gone bust since the start of August, which coincides with surging wholesale costs of natural gas and electricity.
“A lot of the smaller ones are probably going to go,” said Niall Trimble, managing director of consultant Energy Contract Co. “If you were planning to buy gas for 50 pence and it’s 150 pence, that’s a hell of a blow to your finances.”
Bloomberg Intelligence’s Patricio Alvarez said low inventories in Europe ahead of the winter season are primarily the triggers for U.K.’s energy crisis. Here’s more:
Low gas inventories in Europe, ebbing pipeline imports and strong Asian demand driving liquefied natural gas (LNG) cargo diversions form a constructive backdrop for regional wholesale gas prices into heating season. Tapering domestic output, competitive global LNG markets and increased gas burn for power generation amid carbon-price volatility may keep balances tight in 2022 as a post-pandemic recovery unfolds. A mild winter could ease prices from record highs, while piped supplies could improve from higher Norway volume and the potential startup of Russia’s Nord Stream 2 by year-end.
So to Alvarez’s point above, natural gas markets will be tight across the U.K. this winter and will support higher prices. This may cause a tidal wave of corporate failures and economic disruption with industries that are heavily reliant on natural gas and byproducts (we’ve already mentioned slaughterhouses and the food industry being affected).
Back to the bust of smaller power firms, Igloo’s CEO, Matt Clemow, wrote on the company’s website that “like some of our competitors, we have decided to pause sales activity for now.” He said, “with unprecedented wholesale prices, we have taken this decision to allow our teams to focus on those customers we already supply.”
According to Bloomberg, the government’s cap of power prices for consumers “means it’s not profitable for larger companies to come to the rescue.”
U.K. Business Secretary Kwasi Kwarteng told Parliament Monday that the U.K. won’t bail out power suppliers. But that was conflicting with U.K. Prime Minister Boris Johnson’s statement to reporters saying the government would do everything in its power to prevent a bankruptcy wave.
On Monday, the retail arm of Centrica Plc added 350,000 domestic customers and 500 businesses after it took over failed supplier People’s Energy.
Wed, 09/22/2021 – 04:15