In the latest round-up of the weekend’s industry news there is a report in The Telegraph that a third of the UK’s remaining energy suppliers are at “imminent risk” of collapse. Elsewhere the government is accused of sending out bad advice on energy bills. Meanwhile, businesses give their verdict on the COP26 deal.
Third of UK’s remaining energy suppliers are at imminent risk of collapse
About a third of the UK’s dwindling number of domestic energy suppliers are at imminent risk of collapse amid soaring wholesale energy prices, new analysis suggests.
Fourteen electricity and gas suppliers are deemed “maximum risk” under their credit score, accountant Price Bailey found, indicating they will find it difficult to access funding.
It comes amid little sign of respite from the high wholesale natural gas prices caused by a global supply crunch, which have already pushed 19 energy suppliers out of business since the start of September.
Natural gas prices have climbed as much as six times since last summer, but Britain’s price cap on energy bills prevents companies from passing those costs on to customers immediately.
Matt Howard, partner at Price Bailey, said: “The energy supply sector is facing complete carnage as we head into the winter months.
“Over a third of suppliers have already gone bust and another third are at imminent risk of going under in the coming months.”
Price Bailey, a top 30 accountant, checked the Delphi credit scores of all the household electricity and gas supply licence holders registered with Ofgem, excluding the Big Six and two whose credit scores were suppressed.
Of the 29 companies checked, it found that 19 had above average credit risk scores, and 14 are deemed maximum risk.
The figures are likely to trigger alarm among regulators, who have already had to transfer more than two million customers to new companies after their suppliers went bust, under the industry safety net.
There are concerns, however, that this net may not hold out as surviving companies balk at the high costs of taking on new customers under current wholesale prices.
The largest supplier to have collapsed so far was Avro Energy, whose 580,000 customers have been passed onto fast growing challenger Octopus Energy.
Ofgem has been asking companies for weekly updates on their financial health, in an effort to prepare for collapses.
The Telegraph
Energy bills: UK government accused of sending out bad advice
The UK government was accused of sending incorrect advice to millions of energy customers this week, which could cost those who act on it hundreds of pounds.
Letters sent out by the Department for Work and Pensions to people who might be eligible for winter fuel payments were in envelopes that carried a message saying that switching energy tariffs could save them “an extra £290”.
However, the figures were based on deals available last year, and the recent collapse of smaller firms, and the rise in wholesale energy costs, means that most households are better off if they do not switch.
The MoneySavingExpert website, which highlighted the mistake, says the wording was “financially damaging” and that many of those receiving the letters were vulnerable customers.
Martin Lewis, the founder of MoneySavingExpert.com, says: “We are in an extreme crisis. The logic of how to manage bills has been turned on its head. There has never been a time when clarity of message and action is more important. That’s why the government, mailing out an incorrect message to millions, including many of the nation’s most vulnerable, is too big a risk to take.”
Lewis says the right thing for most people now is to do nothing because the regulator’s price cap means that variable tariffs are cheaper than the fixed-rate deals on the market.
“The price cap forces energy firms to sell energy at below its cost price – there is no meaningful cheaper option,” he says.
A spokesperson for the DWP sasy: “We are committed to supporting low-income and vulnerable households to keep warm during the colder months.
“We have encouraged people to switch energy tariffs for a number of years to help them save money.
“The message on these envelopes was simply a suggestion and no further will be issued.”
The energy crisis means that the cost of a deal offering a fixed price for your gas and electricity is likely to be much more than the charges you will face on a tariff that is subject to Ofgem’s price cap.
While the price cap means that the average dual-fuel user will pay £1,277 a year on direct debit, MoneySavingExpert says switchers could face paying up to 30% more. The cheap deals that existed a year ago have all been pulled because wholesale gas prices have risen so much in recent months.
The price cap is expected to rise in April, and analysts have suggested it could go up to an average of an average of £1,660 a year.
The Guardian
Biggest energy firms accused of denying cheapest deals to new customers
Britain’s biggest energy companies were last night accused of flouting regulations by charging consumers more than the price cap for electricity and gas bills.
British Gas, E.on and EDF are refusing to offer new customers the standard variable rate deals and are instead forcing them to take out more expensive fixed rate deals which cost more than the Government’s £1,277 cap.
Kwasi Kwarteng, the Business Secretary, is understood to be “furious” with the companies and has ordered an urgent investigation by Ofgem, the industry’s watchdog.
All three companies confirmed to The Telegraph that the policies were not currently on offer. Ofgem rules say existing customers and new customers must be offered the same tariffs.
Ovo is also only offering fixed deals on its website, following soaring prices which mean energy is now so costly that suppliers are making a loss on variable tariffs.
Octopus Energy and Scottish Power said the cheaper deal was still available to new customers, but only if they rang up and asked for it.
Octopus added it was no longer advertising its variable tariff, saying it would be “imprudent” to do so, and has a number of warnings on its websites advising people not to switch.
While firms technically do not have to actively market loss-making tariffs, Ofgem said denying new customers the best rates was against the rules.
A spokesman said: “Suppliers who offer standard variable tariffs to existing customers must also offer this to new customers.”
The Telegraph understands Mr Kwarteng is “furious” with the energy companies over claims they have broken the rules.
A spokesman from his department last night said: “The Government expects all suppliers to abide by the regulations and licence conditions, which are specifically in place to protect consumers”.
“The Business and Energy Secretary has asked Ofgem to urgently investigate this issue, and we expect the regulator to take immediate action if breaches have taken place.
The energy companies said they had been forced to make “tough commercial decisions in light of current market conditions”, after they were forced to onboard customers from a number of collapsed rivals in the wake of spiralling costs. But they are now under fire for removing the cheapest deals from struggling families.
The Telegraph
Southern Water: Campaigners protest against sewage leaks
Crowds have gathered outside Southern Water’s headquarters to protest against sewage leaks.
Unite the union, which organised the protest, called for the service to be renationalised.
In a statement, Southern Water said it welcomed the chance to engage with protesters.
Dorothy MacEdo, chair of Unite Community Sussex Coast branch said: “This disgusting behaviour must be stopped.
“We need Southern Water to be brought back into public ownership, private companies have no right to own our water supplies,” she said.
The company was fined a record £90m in July after it admitted to 6,971 illegal spills from 17 sites in Hampshire, Kent and West Sussex between 2010 and 2015.
In October, five beaches in Thanet were closed when untreated sewage was pumped into the sea and in July Bulverhythe Beach near Hastings was closed after a sewage pipe burst, flooding local beach huts.
Water companies are allowed to release sewage into rivers after certain weather events, such as prolonged periods of heavy rain.
This protects properties from flooding and prevents sewage from backing up into streets and homes.
BBC News
Business calls for more action after COP26 deal is watered down
Business groups joined climate activists in expressing frustration that national governments were not moving aggressively enough to tackle climate change, after the COP26 agreement was watered down in the final minutes.
Nearly 200 countries at the climate summit in Glasgow reached a deal late on Saturday night, and agreed on the rules for implementing the 2015 Paris climate accord. However, last-minute objections from India and China halted a commitment to end coal use and subsidies for fossil fuels.
The Glasgow deal, reached after two weeks of hard-fought negotiations, included rules for a global carbon market and financial commitments to help countries adapt to climate change.
Leading up to the summit many of the world’s biggest emitters, including the US, Russia and India, set targets to reach net zero emissions around the middle of the century.
While global executives broadly welcomed the deal, many said it did not go far enough. Some complained that companies were showing greater urgency than many governments when it came to global warming.
John Denton, secretary-general of the International Chamber of Commerce, said a “concerted effort” would be needed in coming months to keep alive a target of limiting global warming to 1.5C since preindustrial times. Temperatures have risen 1.1C already.
“We applaud governments for making the tough compromises needed to get a deal over the line in Glasgow . . . but the agreement is, most certainly, not a cause for celebration,” he said.
Mindy Lubber, chief executive of Ceres, a US non-profit with an investor network representing $47tn in assets under management, said: “Investors and companies around the world showed that they support the goals of the Paris Agreement.”
“But private sector action alone is not enough,” she said.
Nigel Wilson, chief of insurance and investment group Legal & General, said “the world is ever more convinced of the imperative on action and delivery”, while Siemens boss Carl Ennis said industries should “focus our efforts on delivering what we can do right here, right now”.
Tony Danker, director-general of the CBI, said “negotiators, activists and businesses will have to keep working” beyond Glasgow to keep the 1.5C target in sight.
“Pressure will surely fall on negotiators to come back to the table ,” he said.
The Glasgow summit had a significant business presence, something that is unusual at the climate meetings. “I’ve seen more CEOs here in the last eight days, than I have at the previous eight years of COPs,” said Jules Kortenhorst, chief executive of RMI, a Colorado-based think-tank.
Financial Times
Utility Week’s weekend press round-up is a curation of articles in the national newspapers relating to the energy and water sector. The views expressed are not those of Utility Week or Faversham House.