The energy supply sector could collapse if any of the major players were to go to the wall, according to the Department of Energy and Climate Change (Decc).
The department is concerned that existing arrangements would fail if a major energy supplier went into administration. “Industry would be placed under tremendous strain, with the risk of financial failure spreading across the market,” Decc warned. It is consulting on new laws to enable the government to financially assist an administrator for a bust supplier.
The current “supplier of last resort” arrangement empowers energy regulator Ofgem to revoke an insolvent supplier’s licence and pass its customers to another supplier. Decc said: “There is significant risk the supplier of last resort arrangements would not be effective in the insolvency of large suppliers.” An Ofgem spokesman said it had warned the previous government that “new arrangements were needed if a large supplier was to experience financial difficulty”.
A Decc spokesman said it was consulting to enable it to make loans to shore up a supplier going through administration and recover the money ultimately from consumers. ” would seek to recover funding through National Grid raising the charges it already levies on shippers and electricity suppliers,” he said.
This article first appeared in Utility Week’s print edition of 29 June 2012.
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