Energy Market Update

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Following the news that many energy companies have ceased trading we felt it important to help you understand what’s happening and provide a response to the most common questions we’re being asked. We understand it’s likely to be an anxious time for many businesses. As always, we’re here to help by answering questions and supporting your organisation through this difficult time.

It’s been a challenging few months for energy advisers and providers as this unprecedented supply shortage has developed.

We understand that may business decision makers face a worrying time so we wanted to share with you some of the questions and answers to queries we’ve received over the past week. If you want to ask us any specific questions about your commercial energy, please get in touch.

Why are wholesale energy prices so high?

There are a number of contributory factors which have led to the soaring gas prices we are currently experiencing creating a ‘perfect storm’.

These factors include:

  • Low storage levels in Britain and Europe caused by unseasonably low temperatures in the first half of the year
  • Lack of LNG (liquified natural gas) deliveries to the UK as tankers are diverted to Asia where demand and prices are high
  • Reduced delivery of gas from European pipelines
  • Low wind generation
  • Reliance on gas fired power stations for power generation with the

resulting impact on electricity prices. Around 40% of the UK’s electricity still comes  from burning gas.

As result of these unprecedented demands on prices, some smaller energy companies have been forced to close their doors.

What happens if my energy company ceases to trade?

If your energy company closes then a “supplier of last resort” will be appointed by OFGEM, the industry regulator. Security of supply to your business will be guaranteed and you do not have to worry about making alternative arrangements until the new supplier has been appointed.

Will I get to keep the same tariff?

It will be unlikely that you will get to retain the same tariff, even if you were in a fixed term contract. You will move to the rates offered by the supplier of last resort.

Can I change suppliers?

There is no requirement to stay with the supplier of last resort although is it better to wait until your supply has transferred to them before you switch. You will be notified by the appointed supplier that they have taken on your supply and advised that you are free to move. We will be able to assist you with this process.

I’m in a fixed contract deal and my supplier is still trading, what will happen?

If you’re in a fixed energy contract then this deal will be honoured, unless the company ceases to service their clients. Assuming your company continues to trade then your deal continue subject to its standard terms and conditions.

Will other gas / electricity companies close?

We don’t have any specific information about other companies planning to close, however it’s likely that over the next few months we’ll see more businesses cease trading.

Why do some companies close and others don’t?

There’s a variety of reasons why some energy companies are closing and others aren’t. The larger firms will have resources to support them through this period of uncertainty. They also leverage their position carefully where as many other providers may not secure energy and will wait to see what happens with the market.

I’ve been told that I need to lock in a new deal now before it gets worse?

There is significant scaremongering in the industry to entice businesses to secure a fixed rate deal. Whilst prices may continue to increase, we’re noticing that the supply of energy is beginning to improve but this does not always have the expected impact on unit rates.

If you’re worried or want tailored advice on your business energy, please get in touch.

What options do I have to protect my business?

There are a lot of different options on the market and we can talk you through them, from differing contract structures to flexible purchasing, we can assess all your options and explain how you can take steps to alleviate concerns.

When do you think prices may return to normal?

It’s uncertain when prices will return to normal. There are still concerns over a tight UK energy system over winter and global demand pushing up prices.

For specific, tailored advice for your organisation, speak to our experienced consultants. Whether you’re interested in procurement planning, including flexible energy, or want to know more about business water audits, we can help.

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