Small energy companies could face a struggle to make it through the winter after GB Energy Supply became the first domestic supplier go out of business in a decade.Household bills could rise, after what one energy boss said was “the first of many” casualties likely to hit the sector, reducing competition.
The three-year-old gas and power supplier, which pulled in customers with cheaper tariffs, blamed “swift and significant increases in energy prices” for its failure. The company’s demise creates uncertainty for its account holders, but they are not at risk of being cut off as the industry regulator Ofgem is expected to have brokered a move to an alternative supplier.
“The closure of GB Energy is as a result of loss-making tariffs coming home to roost,”
“I fear it is the first of many if we have a harsh winter.”
-said Doug Stewart, chief executive of Green Energy UK, an independent customer-owned supplier.
Ofgem, which will appoint a new provider to replace GB Energy, said customers of the defunct brand will not face any supply disruption or lose any outstanding credit balances. The regulator unveiled a “safety net” just last month to protect consumers’ credit balances if they have paid for energy in advance. Ofgem said that the levy would be spread across all energy customers but would only have a small impact on bills.
Small suppliers, in contrast, are heavily exposed to fluctuations in the wholesale market. In a letter to customers, Luke Watson, managing director of GB Energy, blamed the company’s collapse on “swift and significant” price increases.
“As a small supplier, our inability to forward buy energy to allow us to access the best possible wholesale prices, means that the position of the business has become untenable,”
-said Mr. Watson.
Many industry watchers expected the cost of heating our homes to rise next year owing to global prices and a weaker pound, he added.