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Could one of the big six energy suppliers collapse?

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Could one of the big six energy suppliers collapse?
Caption: Could one of the big six energy suppliers collapse?

More energy companies are likely to collapse during a difficult winter with even major firms thought to be vulnerable, it has been warned.

Business minister Kwasi Kwarteng didn’t deny he was preparing for the possibility of a ‘big six’ supplier, with millions of UK customers, collapsing when put on the spot by Andrew Marr earlier.

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So far this year, 12 providers have already folded amid soaring gas prices, with nine in the last month alone. But these have tended to be smaller firms with a tiny share of customers.

The big six – British Gas, EDF Energy, E.ON UK, npower, ScottishPower and SSE – retain around seven in ten customers in the UK market so if any of them were to experience similar difficulties, the repercussions could be huge.

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There are currently no suggestions any of the big six are in trouble but the unprecedented rise in global gas prices is putting a strain on all energy companies.

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Supply firms are ‘losing a lot of money’ due to the energy price cap, which prevents them from instantly passing on rising costs to customers.

Households whose suppliers fail are being transferred automatically to an alternative provider but it’s thought this system would come under severe strain if any of the energy giants were to go.

Appearing on the BBC’s Andrew Marr show on Sunday, Mr Kwarteng was asked if the ‘supplier of last resort’ system could survive if ‘several million customers’ suddenly find themselves needing to switch.

Could one of the big six energy suppliers collapse?
12 energy firms have collapsed this year with nine going in the last month alone

Mr Kwarteng said he was confident the mechanisms in place could cope with such a scenario and that customers would see no disruption in their supply.

Asked by Marr if he was ‘war-gaming the collapse of one of the big six’ Mr Kwarteng responded: ‘I speak to the industry and Ofgem, the regulator, on a daily basis and I have done so for the last six weeks.

‘We are always looking at ways in which the system might be vulnerable but we are also increasingly confident that what we have now can see us through the winter.’

Appearing on the same programme, the head of energy firm Ovo, Stephen Fitzpatrick, predicted many of his competitors will have a ‘hard time’ due to the rising prices.

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But he said most of the larger companies have been through similar price fluctuations in the past so are better prepared for survival than the smaller chains.

‘There are a lot of companies in the market that have sprung up quite recently, there’s been some great competition in the UK market, consumers have benefitted,’ he said.

‘But I think over the past couple of years it’s become too easy to get into the energy market, it’s a very complicated industry and I think some people have underestimated the risks and how complicated it is.

‘There are a lot of companies having a hard time, there’s probably going to be more to come.’

RUNCORN ENGLAND - SEPTEMBER 27: Wind turbines and electricity pylons dominate the landscape at Ince Salt Marshes near to chemical and manufacturing plants on the River Mersey estuary on September 27, 2021 in Runcorn, England. Rising prices of natural gas in the UK have pushed several energy suppliers out of business this year, with other industries warning of knock-on effects, such as the production of carbon dioxide, which is widely used by the food and drink industry. Power generated by wind turbines has also dropped by up to 20% in the last few months due to calm weather across the UK. (Photo by Christopher Furlong/Getty Images)
A drop in wind power supply has caused the price of gas to spiral (Picture: Getty)

Asked is he was absolutely sure all of the big six would survive a ‘very cold winter’, Mr Fitzpatrick said: ‘There are lots of different scenarios and at the moment the issue is not about the temperature and how cold it is because we can look back in time and say this is how much energy we use at different temperatures and so on.

‘The big uncertainty we have at the moment is around price. Prices are up 1000% already in 12 months.’

Meanwhile, the chief executive of Energy UK, Emma Pinchbeck, told Sky News’ Trevor Phillips on Sunday that she’s ‘expecting more retailers to go out of business this winter.’

‘We had around 50 suppliers when we started, and we’re expecting to see more leave the market,’ she said.

‘We have had a process of consolidation, we have had retailers leaving the market in previous years.

‘The issue is how many are failing at once and whether or not our mechanisms, which are in place to look after customers when that happens, are up for that many failures in one go.’

Business minister Kwasi Kwarteng has been in discussions with companies
Business minister Kwasi Kwarteng has been in discussions with companies (Picture: REX)

Dermot Nolan, the former chief executive of Ofgem, said it is ‘more likely’ further providers will go under but he has assured people not to worry if it happens to them as they will be protected. has contacted all of the big six for comment.

A spokeswoman for EDF Energy told us: ‘The price cap is currently hundreds of pounds below the cost of supplying customers with power at today’s high wholesale prices, which shows it is providing customers with protection from spikes in wholesale prices.

‘It also means that energy suppliers face a big financial hit this winter, as demonstrated by the large number going out of business already. Nonetheless EDF wants to reassure our customers that we are here for them, for the long term.’

MORE : Boris Johnson ‘jets off for holiday in Marbella’ leaving behind UK in crisis

MORE : Minister won’t say if you’ll need extra layers to get through winter

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