Good Energy Group’s (Good Energy) has urged the government to protect the energy industry, after 25 UK suppliers ceased trading in the past three months alone, affecting four million customers.
The supplier is battling soaring wholesale gas costs which have driven power prices to record levels this winter across Europe, amid increased demand, gas storage issues, and cold winter weather.
Meanwhile geopolitical tensions between Russia and Ukraine have also increased market uncertainty – with certification of the Nord Stream 2 pipeline pushed back until the second half of next year.
Nigel Pocklington, chief executive of the energy supplier described the situation as a “national crisis” and warned that “no one in the industry is immune.”
He said: “We urge the UK government to support the industry at large in navigating these short-term challenges to protect bill-payers and those that serve them.”
Good Energy’s shares tumbled four per cent on the FTSE AIM-All Share at close of play on Wednesday, after it downgraded its full-year profits guidance by £3m and raised some of its tariffs by 30 per cent.
Alongside downgrading profits, Good Energy revealed in its gloomy trading update that power and gas prices on a day-ahead basis for December compared to November have been on average 36 per cent and 35 per cent more expensive respectively, at £256 per megawatt hour and £2.71 per therm.
The baseload power and gas prices for the first quarter of 2022 are currently forecast at £489 per megawatt hour and £4.39 per therm, rising 102 per cent and 89 per cent respectively
These increases in short term power and gas prices are all now feeding very strongly in 2022/2023 seasonal contracts.
Gas prices dictate market conditions despite industry’s embrace of renewables
Good Energy is a 100 per cent renewable electricity supplier – but the wider market and power prices are still highly dependent on natural gas flows and subsequent prices.
It is also suffering from a further sustained period of low wind since 16 December 2021, which is expected to continue until Christmas.
Current wind levels are approximately 33 per cent of seasonal norms and the impact of this shortfall has been significant across the industry.
Commenting on firm’s current position in an increasingly volatile market, he argued the situation challenged the sustainability of Good Energy’s business.
He explained: “While we have a very strong track record in forecasting and hedging, these unparalleled price hikes, together with the very low levels of churn within our customer base, means that we require far greater working capital to trade similar volumes at these stratospheric price levels.”
Trading up to November was in line with expectations, however since prices spike again Bulb Energy has fallen into de-facto nationalisation.
Investec now estimates consumers will be on the hook for a £3.2bn bill to offset the costs of onboarding consumers to various energy firms through Ofgem’s supplier of last resort process over recent months.
The energy regulator is now set to introduce financial stress tests to ensure suppliers hedge against future market shocks, while it is also reviewing the controversial consumer price cap amid reports its could rise by £700 next spring.