Turmoil in the prices paid for Britain’s wholesale and retail gas is likely to continue deep into 2022, a leading analysis firm predicted today, as two suppliers quit trading. Dozens are expected to follow.
Meanwhile energy secretary Kwasi Kwarteng confronted an unpalatable truth thus far dodged by Johnson, confirming before MPs that BEIS may levy a windfall tax on traders and generators reaping excess profits from gas supply.
Speaking today at a parliamentary committee, Kwarteng indicated that such a levy might be a way of correcting the market.
The minister warned MPs that preparations were being made for gas prices to remain high for some time. Thus the energy secretary of state today contradicted his boss. Johnson earlier this week described the crisis as “temporary”.
The collapse in a single day of Avro, at 580,000 accounts reputedly the largest UK supplier ever to go bust, and Green, with a quarter of a million clients, left over 800,00 overwhelmingly domestic customers without immediate suppliers.
Green blamed “unprecedented market conditions and regulatory failings” for its collapse, taking a swipe at the Johnson administration, which it said had “left behind” smaller energy suppliers.
Its executives had been vocal critics of the price cap, calling on ministers to review the policy which has left suppliers selling power to customers at a loss.
Newcastle-based Green was among 15 small suppliers who wrote this week to Ofgem and BEIS, asking for the energy price cap methodology to be reviewed and for an immediate support package to be assembled.
Commenting on the double collapse, consumer energy champion Citizens Advice noted that 15,000 of Avro’s customers rely on the Warm Homes Discount.
CA head of energy policy Gillian Cooper called on Ofgem and ministers to ensure no domestic account holder should lose the benefit when allocated to a new supplier.
“These latest failures will add to people’s worries at what’s already an extremely unsettling time. Supplier collapses and rocketing energy prices, combined with the looming cut to Universal Credit, are creating huge amounts of uncertainty for millions of people”.
“Energy customers won’t lose their supply; their credit balances are protected; and the price cap limits the cost of bills”, she noted.
“Customers in debt to failed suppliers should continue to have access to affordable repayment plans, ” Cooper insisted.
Ofgem reportedly also fined five suppliers a combined £750,000 for failing to pay funds due under price support mechanisms for renewables.
Cornwall Insight released a worst-case analysis forecasting that the default price cap will increase in summer 2022 by 14% to £1,455 a year for consumers taking gas and electricity.
If true, the hike will follow this year’s record increase which saw the price cap peaking at £1,277.
Dr Craig Lowrey, Senior Consultant at Cornwall Insight, said, “These figures reflect material increases in the period since our most recent default tariff cap forecast at the end of July 2021.
However, there is a lot of uncertainty regarding the wholesale market and a long way to go before future default cap levels are confirmed in February 2022.
“With record wholesale prices now being priced in, we would need to see a material and sustained reduction in the wholesale market to avoid the kind of cap levels we are predicting for that period.”
