About 160,000 UK households are to face higher energy bills in the new year after the collapse of GB Energy.
The three year-old gas and power supplier, which pulled in customers with cheaper tariffs, blamed “swift and significant increases in energy prices” for its failure. The company’s demise creates uncertainty for its account holders, but they are not at risk of being cut off as the industry regulator Ofgem is expected to have brokered a move to an alternative supplier.
“It is with regret that we are informing you that GB Energy Supply is no longer trading,” said its managing director, Luke Watson, on the company’s website. “Due to swift and significant increases in energy prices over recent months and, as a small supplier our inability to forward buy energy to allow us to access the best possible wholesale prices, means that the position of the business has become untenable.”
Customers are no longer able to log on to GB Energy’s website to access their accounts and some took to social media concerned they would lose credit balances built up over the summer months. But Ofgem advised account holders to sit tight and wait to hear from their new supplier on how they would get their money back.
“There is no need to worry as we will ensure your energy supplies are safe,” said Rachel Fletcher, Ofgem’s senior partner for consumers and competition. “Ofgem are actively working with the industry to ensure your transition to a new supplier is as smooth as possible. While this process is under way our advice is not to do anything as you can continue to rely on your energy supply as normal.”
The government has sought to increase competition in the retail market dominated by the “big six” suppliers – British Gas, E.ON, Npower, EDF, Scottish Power and SSE . There are now 41 companies competing for British households, but the business models of the smaller entrants are now being tested as electricity and gas prices start to rise – partly because of the devaluation of sterling since the Brexit vote.
In an interview earlier this year, Watson, a former submariner who worked in sales before moving into the energy sector, said it had been fortunate that wholesale costs had been low over the past couple of years.
“I think the challenge for independent suppliers will come when there is volatility in the wholesale market,” he told the trade magazine Utility Week in June. “That is when the hedging strategy comes into play and we are very conscious of that … It is a risk and we are monitoring prices three times a day.”
GB Energy previously traded as Altitude Energy Supply from 2013 to 2014 and made a loss of £630,018 on sales of £22.2m in 2015. The company operated from Preston and had a staff of less than 20 despite its large customer base.
Ofgem will move GB Energy customers on to what is known as a “deemed” contract. The watchdog says on its website these are usually more expensive: “The supplier takes on more risk, as customers are moved to a new supplier quickly without the usual background credit checks. So, they also charge more, to make up for this extra risk.”
It is then up to GB Energy customers to ensure they are on the best tariff or switch to a new supplier. But with wholesale prices up this year it is unlikely they will be able to find a deal similar to their existing plan.