UK Energy crisis: Reasons and repercussions

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UK Energy crisis: Reasons and repercussions

 UK Energy crisis: Reasons and repercussions
Image source: hrui, Shutterstock.com

Highlights

  • Entice Energy and Orbit Energy are the latest firms to collapse after they failed to pay their schemes dues.
  • The UK government had put another failed energy supplier, Bulb, which had around 1.7 million customers, under special administration.

The UK’s energy crisis has worsened further. After Bulb Energy, two more energy suppliers have gone bust due to the continued rise in energy prices in the country. Entice Energy and Orbit Energy are the latest to collapse after they failed to pay their schemes dues leading to the removal of their license by the regulatory.

Ofgem, a government regulator for the electricity and natural gas market, said that the customers of the two failed companies would be transferred to new suppliers, and there would be no change to their energy supply. Since August 2021, the UK has so far witnessed as many as 25 small energy suppliers go bust due to a significant rise in energy prices.

According to a forecast by the industry experts, the number of energy suppliers in the UK market might be down to just ten companies by December 2021 compared to 71 suppliers at the start of 2021. In addition, 11 more firms are at high risk of closing down their businesses, leading to few suppliers by next year and high household energy bills.

Reason for failure

The UK has been facing a severe energy crisis due to a consistent rise in wholesale gas prices, which has risen by over 250% since January 2021. Moreover, the UK government provides energy to households at specific price cap and energy suppliers cannot charge customers above the price cap. The price cap limit is set by Ofgem and was revised to £1,277 from £1,138 on 1 October 2021. However, despite an increase in price cap, the energy suppliers continue to be under pressure due to the exponential rise in global prices.

Also, the country has been witnessing high demand for energy after the Covid-19 pandemic, which has not been met due to lower domestic reserves and high commodity and carbon prices.

Earlier, the UK government had put another failed energy supplier, Bulb, which had around 1.7 million customers, under special administration. The UK government has provided £1.7 billion, equivalent to £1000 per customer, as working capital to the company so that the customers continue to receive electricity and gas till April 2022.

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