Bulb Energy set to enter administration
Bulb Energy is the latest energy supplier to have failed during the ongoing energy crisis.
The company, which supplies 1.7 million customers, has been placed into a special administration process that’s designed to ensure the supplier is secure and all customer balances are protected. Within the special administration process, the company can continue as normal whilst an extensive plan is mapped out for its future.
Ofgem said in a statement regarding Bulb: “We’ve decided to support Bulb being placed into special administration, which means it will continue to operate with no interruption of service or supply to members. If you’re a Bulb member, please don’t worry as your energy supply is secure and all credit balances are protected.”
The news of the company’s collapse comes as no shock to industry rivals, as Bulb struggled to secure a willing buyer or new investment before the UK’s impending winter energy crisis.
21 suppliers have gone bust or ceased trading since the start of September. This is in part due to unsustainably high wholesale energy prices that cannot be passed onto customers because of the energy price cap.
What next for Bulb?
The ‘special administration’ measures have been brought in to help ensure Bulb can keep operating – the supplier has essentially been temporarily nationalised – but if it does cease trading or go bust it will put 1,000 jobs at risk.
If you’re a Bulb customer, you’ll be switched to an Ofgem-appointed supplier of last resort (SoLR). In any case, there’ll be no disruption to your supply and you’ll be placed onto rates that are protected by the energy price cap.
Why are energy suppliers going bust?
The ongoing energy crisis has contributed to a number of suppliers to go bust, but there have been ongoing issues for some years now. Below are some of them explained in a bit more detail.
Rising wholesale costs and tighter margins
Rising wholesale costs are a big problem for struggling suppliers, particularly those who try to keep prices low for customers. A raise in wholesale costs means an increase in the price energy firms pay to buy gas and electricity to supply their customers.
To read more on this, check out the ‘why are energy prices rising?’ over on Bionic.
The cost of government obligations
Government programs are costs that energy suppliers have to cover. These obligations are designed to encourage the use of renewable energy, help save energy, and even support vulnerable customers such as the elderly. The suppliers who want to keep costs low for customers, or just have tight margins, have had problems keeping up with these costs.
Spark Energy, who ceased trading in November 2018, is an example of this. This happened as a result of missing a deadline to make a £14.4 million renewable energy payment.
Poor customer service
Some energy companies go under because they can’t offer customers the level of service required, as hard as it is to believe.
Extra Energy did so while being investigated by Ofgem regarding more than 1,160 complaints that had been made against it in a 12-month period. They went bust in November 2018.
One Select is another example of a supplier who went bust as a result of poor customer service. Citizens Advice’s star rating table, which gives a customer service ranking to each energy supplier, ranked One Select at the bottom. They eventually went bust in December 2018.
Economy Energy is yet another similar story. They were banned from taking on any more customers by Ofgem until their customer service improved. It failed to improve, and they eventually went bust in 2019. However, just before they went bust, they put together an agreement with E to sell 30,000 of its customers to them, without notifying Ofgem of this.
A provisional order was then put in place by Ofgem to stop the transfer from going ahead, and then it was eventually uncovered that Economy Energy and E were having an anti-competitive agreement with one another.
This meant that neither of them would target each other’s customers through face-to-face sales. After being found guilty of breaching competitive laws, Ofgem fined both companies hundreds of thousands of pounds.
The energy price cap
The energy price cap was introduced in 2018 to limit the rates charged by energy suppliers on prepayment and standard variable rate tariffs. The idea was that a cap would help put an end to what, then Prime Minister, Theresa May called “rip off energy prices."
But what we’ve seen is suppliers adjusting their prices to fall in line with the level of the price cap. This means some cheaper deals have been pulled, particularly when the level of the cap has been increased at its six-monthly review, as has been the case in three out of the last six reviews.
What should I do if my energy supplier goes bust?
If your energy supplier goes bust, there’s no need to worry. Rest assured knowing your contract will be passed onto another supplier by Ofgem, so you won’t be left without gas and electricity.
The supplier of last resort (SoLR) is the name of this new supplier, who will then provide your home energy until you switch to a new supplier with a better deal. For now, it is best to sit tight and not switch suppliers once your SoLR has been announced.
To find out more, check out what happens when your energy supplier goes bust.
Click here to run an energy price comparison, and see if you could be paying less for your gas and electricity.