Another small British household energy supplier has collapsed in a sign that rising wholesale gas prices are continuing to take a toll on the market, as well as on household energy bills.
Around 3,000 customers of UK Energy Incubator Hub, which trades as Northumbria Energy and Neo Energy, have been transferred to Octopus Energy, the country’s fifth largest supplier, according to energy regulator Ofgem.
The transfers were made through the government’s so-called supplier of last resort process, which allows companies to recover the costs of taking on customers from collapsed energy providers. The Citizens Advice charity warned yesterday that householders were already bearing the price of supplier failures through an additional £164 a year charge on their bills.
UK Energy Incubator Hub had faced a series of warnings from Ofgem. “As we enter the winter period, it will continue to be challenging for suppliers and we may see more failures,” said Alasdair Dorrat, a partner at consultancy Baringa.
Ofgem announced the collapse of Northumberland-based UK Energy Incubator Hub just hours before its chief executive Jonathan Brearley faced a grilling from MPs about domestic energy prices and the regulator’s role in Britain’s retail energy crisis, which has claimed more than 30 companies since the start of 2021.
The regulator has come under intense pressure for its role in the crisis. An independent investigation that it commissioned said the regulator had offered new entrants a “free bet”, enabling them to join with minimal risk and to exit with almost no downside.
Brearley repeated claims that the crisis was triggered by a “once in a generation” change in wholesale energy prices driven by global geopolitical factors, but admitted that the regulator should have done more earlier to ensure suppliers in the market were more financially resilient to external shocks.
He also said the design of Britain’s energy price cap, which dictates bills for 23mn households, did not allow suppliers to pass on big surges in wholesale prices quickly enough.
Analysts have warned that households in Britain face a rise of 65 per cent in their energy bills to more than £3,200 a year from October, when the cap is next reviewed.
“We accept that looking back financial resilience controls should have been stronger and equally the design of the price cap should have allowed the market to adapt more freely,” said Brearley, adding that the regulator had since introduced several measures to prevent a future crisis of the same scale.
Octopus Energy has already taken on more than 1mn customers in the past two years through acquisitions as well as through supplier of last resort transfers. This includes Avro Energy, one of the largest of the failed energy providers.
Octopus Energy said it welcomed the new customers from the UK Energy Incubator Hub. “There will be no interruption or impact to their energy supply,” it added.