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Over a million homes face higher bills as gas prices force more energy firms to go bust
23 September 2021, 07:09 | Updated: 23 September 2021, 09:25
- Collapse of Avro Energy and Green means nine suppliers have been lost this year
- Avro’s 580,000 customers and Green’s 255,000 customers will all be moved to new suppliers
Energy firms Avro and Green - which have over 830,000 customers between them - have become the latest companies to cease trading amid soaring gas prices.
Regulator Ofgem said it would ensure that Avro's 580,000 domestic gas and electricity customers, and Green's 255,000 households would be protected.
But it means that hundreds of thousands of people are expected to face higher bills and there are warnings that more companies are likely to go under in the gas price crisis, leaving over a million households facing hikes to their bills.
However, speaking on LBC's Nick Ferrari at Breakfast on Thursday, business minister Paul Scully said the Government was not planning a bailout.
"There have been some calls for assistance as rising gas prices lead to smaller firms collapsing, diminishing competition in the market and leading to customers facing higher tariffs when they are shifted to surviving, bigger companies.
Mr Scully said: "No, we're not looking at bailing out companies, what we are doing is working with Ofgem and we're speaking on a regular basis to energy companies.
"There are companies that tend to leave the market each and every year so Ofgem are used to having to step in and ensure continuity of supply for consumers."
The boss of Ofgem described the current situation as "something not seen before."
The regulator will choose a new supplier for households affected, and said customers should wait to be contacted by their new supplier.
"I want to reassure customers of Avro Energy and Green Supplier Limited that they do not need to worry. Under our safety net we'll make sure your energy supplies continue," Ofgem director of retail Neil Lawrence said.
"If you have credit on your Avro Energy or Green Supplier Limited account this is protected and you will not lose the money that is owed to you."
Justina Miltienyte, energy policy expert at Uswitch, also said affected customers should "sit tight and wait until their account is transferred to the new provider before trying to switch".
"Customers can be reassured that their energy supply will continue as normal and any credit balances they have built up will be protected," said Ms Miltienyte, and advised that customers make a note of their meter readings now.
Ms Miltienyte said the closure of Arvo and Green would "cause further worry" and was a "double blow" for the industry.
"Avro and Green’s simultaneous exits from the market come after People’s Energy and Utility Point ceased trading last week," she said.
"Nine energy suppliers have been forced out this year so far and it’s likely that more may follow.
"Soaring wholesale prices are making conditions difficult for all suppliers, but challenger brands in particular are struggling to make ends meet."
As well as its thousands of customers, Green employs around 185 members of staff.
The company's closure comes just a day after it announced it was facing administration and was in talks with Alvarez & Marsal (A&M) to coordinate plans to use the industry regulator Ofgem's Supplier of Last Resort (SOLR) mechanism.
Gas prices have surged 250 per cent since the beginning of the year.
They have seen a 70 per cent rise in the last month alone.
A number of other small energy companies have collapsed, affecting more than one million customers.
They include People's Energy, Utility Point, PfP Energy and MoneyPlus Energy.
Finance expert Martin Lewis warned LBC listeners on Tuesday that another gas price rise was expected in the first half of next year - something he called "unprecedented" and "outrageous".
The head of Ofgem, Jonathan Brearley, told MPs on Wednesday that "well above" hundreds of thousands of customers could be affected as the crisis continues.
Asked about Boris Johnson's suggestion that the price rise was temporary, Mr Brearley said: "It's extremely difficult to predict the future of the gas price and we have seen some unprecedented change in the last six months."
Business Secretary Kwasi Kwarteng said preparations were being made for gas prices to remain high for some time.
He told the Business, Energy and Industrial Strategy Committee: "I think 'temporary' means that it's a position where the price has spiked considerably... I think it has quadrupled in the last six months, seven months.
"You would expect normally that the price would revert to the mean, it's not something that we think is going to be sustainable.
"But, of course, we have to prepare for longer-term high prices."
Ed Miliband, Labour’s Shadow Business Secretary, said: "The government response to this crisis has been characterised by a lack of preparedness that got us into it and a complacency about how we will get out of it.
"With more than 800,000 customers seeing their suppliers go bust today alone, the Business Secretary has got to come clean about the scale and severity of the threat to suppliers and recognise the economic hardship facing working people.
"It's becoming increasingly clear that the impact of soaring global gas prices on UK businesses and families is going to be stark, because key government failures mean our energy system is not resilient enough.
"To help customers, the first thing that the Government must do is cancel the cut to Universal Credit.
"In taking action to stabilise the market, Ministers must explain whether taxpayers' money is required and if so, what the mechanisms they are going to use are and how they will get value for money rather than funnelling money into the biggest energy suppliers."