Gas crisis could force smaller energy suppliers out of business

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"Attention - Danger of Explosion" Credit: JOE KLAMAR/AFP

The fate of Britain’s new breed of upstart energy suppliers hangs in the balance after a series of gas supply disruptions ripped through energy markets last week.

In the aftermath of the UK’s most explosive gas price shock in five years, the price of gas for the coldest months of winter remains a third higher than this time last year.

Already one new market entrant, Toto Energy, has announced a 50pc price hike for its customers, including those on fixed-rate contracts.

The Brighton-based supplier emailed its customers to explain that it is a “seasonal” plan. 

Senior energy bosses told The Sunday Telegraph that the industry was braced for smaller suppliers to go bust because many offer rock-bottom rates without the financial backing to absorb a market shock.

A spokesman for the industry regulator said it is monitoring the market for wider financial risks to suppliers, including market price increases, and is also closely monitoring individual suppliers with a focus on financial indicators. 

The UK gas market rose dramatically last week after the emergency shutdown of the North Sea’s most important pipeline amid technical issues in Norwegian waters.  Prices reached five-year highs the next day in the wake of a deadly explosion at a key European gas hub. 

The market upheaval emerged in the run-up to  parliamentary scrutiny of the Government’s controversial energy price cap legislation, which an even greater number of smaller suppliers by preventing them from passing on higher costs.

Suppliers are expected to warn MPs that the regulator must review the cap regularly to avoid creating a market crunch if costs surge in the wake of another price spike.

Meanwhile, the Citizens Advice Bureau has warned that there should be stricter rules to exclude would-be suppliers without enough financial backing to survive a sudden market move.

“We retain real concerns that some of the financial models we see being adopted appear unsustainable or are unlikely to be in consumers’ long-term interests,” the charity said.

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