Third of Energy Suppliers at Imminent Risk of Collapse

14 gas and electricity suppliers are at “maximum risk” of toppling due to surging wholesale energy prices, accountants Price Bailey warned over the weekend.

The top 30 accountancy told the Telegraph that the poor credit scores of the 14 struggling suppliers will make it difficult for them to access funding to survive the winter.

Astronomic natural gas prices—at times six times higher than the summer of 2020—have felled 20 energy suppliers since August, leaving more than 2 million customers to be transferred to a new company. Market watchers have warned for weeks that unless the high prices relent or Ofgem lifts the price cap that prevents them from passing costs onto customers more companies will surely follow.

To quantify the number at risk, Price Bailey checked the Delphi credit scores of all household and gas supply licence holders registered with Ofgem, excluding the Big Six and two which suppressed their credit scores.

Of the 29 companies checked, 19 had above average credit scores, and 14 were deemed at “maximum risk.”

Commercial Delphi scores are a credit rating system calculated by Experian to predict credit risk and potential business failure within the next 12 months based on its performance and creditworthiness.

Matt Howard, partner at Price Bailey, told the Telegraph: “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.”

Anticipating failures, Ofgem has been asking surviving companies for weekly updates on their financial health. The regulator has also readied City firm Teneo to step in as a special administrator to run a failed major supplier—predicted to be Bulb—should the strained supplier of last resort mechanism fail.

While the regulator and government have resisted calls to lift the price cap this winter, Ofgem will review the cap, consulting on proposals to update the level more regularly and tweak the methodology. Any changes would come into effect in April.

The regulator will also do more to ensure suppliers have sustainable business models and appropriately manage financial risk. Ofgem has faced criticism for allowing unprepared suppliers into the market, with competitors arguing that many of the companies that have fallen during the recent crisis were poorly run and charging unsustainably low prices.

Regardless of the changes to the cap's methodology, it's expected to rise by £400 per year from April.