Two energy firms collapse in one day as gas and leccy prices rocket

Avro Energy and Green have become the latest casualties in the UK’s gas crisis after each collapsing this afternoon.

It came hours after the sector’s regulator, Ofgem, warned that new suppliers would be needed for ‘well above’ hundreds of thousands of customers.

Green, which serves around 250,000 customers, lined up advisers to oversee a potential insolvency, as ministers ruled out intervening to prop up struggling firms.

Avro Energy, serves 580,000 people. Together with Green Energy, they both take up just under 3% of the UK energy market, according to Ofgem.

In a statement, Ofgem blamed the collapse on an ‘unprecedented increase in global gas prices’.

The regulator has promised to protect the credit balances of each of the firms’ customers. It also said it would ensure a new supplier was appointed to take on each of their households.

Customers should hang fire for now before switching providers until they are contacted by whichever firm Ofgem chooses as a replacement.

However, many companies will be reluctant to take on hundreds of thousands of new customers, a costly and time-consuming process.

Since the sharp rise in gas prices, a number of other small firms have gone under, including People’s Energy, Utility Point, PfP Energy and MoneyPlus Energy.

It has affected around 1.5million UK customers, or 5% of the market, and other companies are in danger.

Bulb, the UK’s sixth largest energy company, which serves 1.7million customers, is seeking financing.

Meanwhile Igloo has said it is working with restructuring consultants lvarez & Marsal in order to stay afloat, the BBC reports.

Ofgem’s director of retail, Neil Lawrence, said the regulator’s ‘number one priority is to protect customers’.

He said: ‘We know this is a worrying time for many people and news of a supplier going out of business can be unsettling.

‘I want to reassure customers of Avro Energy and Green Supplier Limited that they do not need to worry.

‘Under our safety net we’ll make sure your energy supplies continue. If you have credit on your Avro Energy or Green Supplier Limited account this is protected and you will not lose the money that is owed to you.’

Due to the increases companies have promised to sell gas to customers for a less than it currently costs to buy from producers, putting them in a difficult position if they did not buy ahead as a form of insurance.

Avro and Green’s failure come after energy companies PFP, MoneyPlus, Utility Point and People’s Energy all exited the supply market in just over two weeks.

Last month HUB Energy, which had just 6,000 customers, also stopped trading.

One source at an energy supplier said: ‘Like three-quarters of the market we’ve already bought energy for our customers in advance.

‘We will now have to look at absorbing customers from these failed companies and buying more energy at eye-watering prices and that will be very tough.’

Earlier the Government agreed to potentially pay tens of millions of pounds to subsidise a major US-owned fertiliser manufacturer to ensure the supply of CO2 for the food sector continues amid the energy crisis.

A deal brokered by Business Secretary Kwasi Kwarteng will see the UK Government provide ‘limited financial support’ towards CF Fertilisers’ running costs to prevent a food supply shortage at Britain’s supermarkets.

The agreement will be in place for three weeks while the ‘CO2 market adapts’ to the surge in global gas prices, according to the Department for Business, Energy and Industrial Strategy (Beis).

Environment, Food and Rural Affairs Secretary George Eustice said the final details of the agreement were still being worked on but ‘it’s going to be into many millions, possibly the tens of millions’.

CF Fertilisers suspended production at plants in Teesside and Cheshire due to soaring energy costs as global gas prices spiked.

The CO2 produced as a by-product at the plants is vital to the food industry, where it is used to stun animals in slaughterhouses and to keep packaged products fresh.

Defending the decision to pump the firm with tax money Eustice told Sky News: ‘If we did not act, then by this weekend, or certainly by the early part of next week, some of the poultry processing plants would need to close, and then we would have animal welfare issues.

‘You would have lots of chickens on farms that couldn’t be slaughtered on time and would have to be euthanised on farms. We would have a similar situation with pigs.’

He told BBC Radio 4’s Today programme it was ‘justified’ for the Government to intervene in this ‘very short-term, targeted way’ as not doing so would ‘be a risk to our food supply chain’.

Kwarteng said the decision would avert disruption in the ‘many critical industries that rely on a stable supply’ of carbon dioxide.

CF Fertilisers produces around 60% of the UK’s CO2, used primarily by the food sector but also in the health and nuclear industries.

It suspended operations at its Teesside and Cheshire plants because of high global gas costs.

Beis officials said the ‘exceptional short-term arrangement’ with the American business would allow the company to immediately restart operations and produce CO2 at its Billingham plant in Teesside.

Kwarteng said the three-week limit for the taxpayer support was because ‘in a critical intervention like that you have to have a way of exiting the arrangement’.

He said he was ‘coonfident that we can get other sources of CO2 in that period’.

Eustice suggested the second plant would also be brought back online and said the food industry will have to accept a major hike in C02 rates, which could increase fivefold from £200 a tonne to £1,000, but because the gas makes up only a small part of overall costs there would not be a ‘major impact on food prices’ for consumers.

Urging the industry to ‘get its act together’ Food and Drink Federation chief executive Ian Wright said: ‘I think it’s a temporary solution but it’s a welcome one, and means there won’t be many noticeable shortages on the shelves, although there are already some because of staff shortages.’

Get in touch with our news team by emailing us at [email protected]

For more stories like this, check our news page.

Source: Read Full Article