According to Price Bailey, an accountant, fourteen electricity and gas suppliers have been deemed maximum risks’ by their credit scores.
New analysis shows that a third of the UK’s declining number of domestic energy suppliers could be at risk of being shut down by rising wholesale energy prices.
Price Bailey discovered that 14 electricity and gas suppliers were deemed “maximum risks” by their credit score. This means they will have difficulty accessing funding.
This comes amid little relief from the high wholesale gas prices due to a global supply crunch that has already driven 19 energy suppliers out of business since September.
Although natural gas prices have increased six-fold since last summer, Britain’s price cap on energy bills stops companies from passing these costs on to their customers immediately.
Matt Howard, Price Bailey’s partner, stated that the energy supply sector faces complete chaos as we enter the winter months.
“Over a third have gone bankrupt and another third are in imminent danger of going under within the next months.”
Price Bailey, a top 30-ranked accountant, reviewed the Delphi credit scores for all household electricity and gas supply license holders registered with Ofgem. He did not include the Big Six or two who had their credit scores suppressed.
It found that 29 of the 29 companies it checked had credit scores above average and 14 were deemed high risk.
These numbers are likely to alarm regulators who, as part of the industry safety net, have had to transfer over two million customers to new businesses after their suppliers went bankrupt.
However, there are concerns that the net might not be strong enough as companies that survive baulk at the high cost of taking on new customers at current wholesale prices may end up being insolvent.
Avro Energy was the largest supplier to have gone bust so far. 580,000 of its customers were passed on to Octopus Energy, which is a fast-growing challenger.
In an effort to prevent collapses, Ofgem asked companies to provide weekly updates on their financial health.
Experts think the price cap will rise by £400 when it resets in April. This would increase the average household dual fuel bill to £1,677.
In recent years, the domestic supply sector has changed. The Big Six’s market share has been eroded and many smaller competitors have taken its place.
