energy

Key questions answered for customers after Bulb Energy’s collapse


Bulb Energy has collapsed, in the biggest ever energy supplier failure. Here we address some of the most important questions for the company’s 1.7 million household customers.

Why has this happened?
At the start of the energy crisis in September, analysts were warning there would be a tsunami of small energy supplier failures – and 21 suppliers have now collapsed. The cause is simple. Wholesale prices have soared, leaving firms that had not forward-bought all their gas and electricity having to buy it for more than they were able to sell it to customers for. The price cap limits the amount suppliers can charge households.

Bulb was a big supplier – why has it failed?
The energy crisis just got serious. Until now, the failures have been limited to smaller, little-known suppliers. Bulb was the seventh-biggest supplier, and while it tried to tough it out, in the hope the market would return to normal, it ultimately ran out of time and cash. In recent weeks it was heavily criticised for upping its customers direct debits, in an apparent attempt to bolster its balance sheet.

I am a Bulb customer – what happens now?
Until now, customers of collapsed suppliers have all been moved to a new supplier appointed by the regulator Ofgem – the supplier of last resort. Those customers had no say in it, and in many cases suffered big price hikes as a result. Bulb is considered too big to go through that process. Instead, a firm of special administrators will take over the day-to-day running of the company. They will be named in the next few days.

In reality, Bulb customers will see no difference, and any credit balance that they built up on their account is protected. Customers should continue to pay their direct debits or bills as before. Bulb was unusual in that all its customers were on the same variable – now capped – tariff, meaning they will continue to be charged the same, capped prices – see below.

The administrators will seek to run the company until they are in a position to either trade it back into a saleable state or, as is more likely, the market has calmed to the point they can move the customers over to another supplier that actually wants to take them on.

What is the price cap?
The cap is the maximum your supplier can charge you for each unit of energy, with standing charges and VAT taken into account. For a household with average gas and electricity consumption the charges work out at £1,277 a year – higher-using households could easily see their bills rise to £2,000 a year. For pre-payment customers with average usage, the new cap will equate to an annual bill of £1,309.

What is going to happen to prices in future?
The price cap changes each October and April, and experts are already warning that it will rise again next spring. In October, the analysts Cornwall Insight predicted the price cap will rise to around £1,660 a year in April for average use, and it could be higher. The hope is that the market calms down and wholesale prices return to normal, at which point consumer prices should also fall, but this is looking unlikely.

Can’t I just switch supplier?
Normally, switching would be the response to rising prices. However, as happened to the financial markets in 2008, the energy market has all but seized up. While there are a few companies still offering to take on new customers, there is little point in switching, as you will just end up paying the same prices.

If this has happened to Bulb, are other big suppliers at risk?
That is the million-dollar question. Bulb will not be the last supplier to collapse, but whether it is the last large supplier to fail remains to be seen. While the likes of EDF and the other power-generating companies will be fine, any supplier that has not forward-bought its energy and which relies on the wholesale markets for even a proportion of it is facing an uncertain future. Watch this space.



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