Energy market meltdown could burden UK households with £3.2bn bill
UK households could be on the hook for £3.2bn to cover the costs of the energy market meltdown this winter, which has already claimed over 20 suppliers and affected four million customers.
New research published by Investec suggests that consumers will face a heavy burden to prop up struggling energy firms battling soaring wholesale energy costs.
Martin Young, senior analyst at Investec, said that pinpointing a total cost for the energy crisis was “akin to attempting to nail jelly to a wall” but argued the figure could reach £3.2bn – an equivalent of £120 per household.
The costs would most likely be mutualised across the market through energy bills.
This includes £1.7bn of support in the form of loans and grants reportedly set aside by the government to allow Bulb to trade through the winter.
Investec also calculates the costs to purchase the commodity needs of consumers guided through the supplier of last resort process could reach £600 per customer.
Pointing to the number of supplier failures, which most recently includes the collapse of Orbit Energy and Entice Energy last week, Investec has questioned whether the level of monitoring and oversight undertaken by Ofgem was sufficient.
The financial firm believes there are “clearly questions for those responsible for market oversight to answer”.
Investec has consequently pushed for an inquiry next year to deal with the ramifications of the crisis.
Ofgem committed earlier this month to reviewing its price cap, amid calls from industry bosses including the CEO of Scottish Power and the founder of Utilita Energy to reform the mechanism to prevent more firms collapsing.
Investec argues that a smaller market could strengthen the market, provided it was combined with suffient oversight.
Young concluded: “We now have a considerably smaller pool of suppliers, and we continue to argue that this should ultimately lead to a stronger supply market, hopefully supported by a regulatory backdrop that drops an obsession with switching for switching’s sake, and is supportive of the role that suppliers need to play in facilitating the journey to net zero.”