Soaring energy bills threatens UK electricity and gas market - Energy

Read in this article

  • The UK government is setting a cap on energy prices for homes.
  • The losses of gas and electricity utility companies have been continuing since 2019.
  • Accusations of the government subsidizing consumers from homes at the expense of companies.
  • High inflation threatens to increase the bankruptcy of energy companies.
  • Expectations for the government to charge consumers the cost of corporate bankruptcy at a later time.

The debts of bad energy bills for homes in the United Kingdom have risen dramatically, due to the increase in commodity prices, and the rise in inflation rates; This limited the ability of consumers to pay, and is negatively reflected in the capabilities of companies that provide consumers with gas and electricity.

To make matters worse, the debts for energy bills continue to fail to grow, due to the continued rise in prices, and the fact that they have not reached a ceiling that they can stand at until now.

Corporate Warning

Electricity and gas utility companies in the United Kingdom are threatened by bad energy bills, which continue to rise to exceed billions of dollars, Bloomberg Agency reported, yesterday, Sunday, May 15th.

Companies such as Iberdrola S.A. Scotch Power have warned that mounting bad energy bills threatens the market’s sustainability.

For example, the German “ONSE” company, which operates in the UK market, expects its dues to customers to rise by 50% by the end of this year, to reach 2.4 billion pounds ($ 3 billion), according to the statements of its head, Michael Lewis, to a committee of Parliament, last month.

Centuryia, the UK’s largest energy provider, said that 10% of its 7.2 million customers; are in default; This means that they may be in the category of bad energy bill debtors.

empty circle

Energy bills debts
A gas station in the United Kingdom – Photo from the newspaper “The Guardian”

Analysts in the energy and corporate sectors believe that the growing volume of bad energy bills in the UK is entering the local market in a vicious circle, in light of high inflation rates, which the Bank of England expected to reach double figures – more than 9% – and the continued process of providing customers with gas and electricity, with consumers’ diminishing ability to pay.

“It is clear that the current crisis of living is continuing, and of all the bills paid by consumers the energy bills remain the most stable,” said Dieter Helm, a former government energy policy adviser, professor at Oxford University.

The United Kingdom sets an energy price ceiling for homes; To protect consumers from their sharp rise, prices jumped to record levels last April, by 54%; This put additional pressure on 22 million consumers.

It is expected to jump again in the next price review in October; This pushes about 40% of the population into the cycle of energy poverty, and increases the debts of bad energy bills, according to the companies.

taxation

Some politicians in the UK are calling; to tax energy supply companies; To provide financing that supports consumers, while companies respond that they have been making losses since about 2019, due to competition between them, and the price ceiling set by the Energy Regulatory Authority “Ofgm”, according to a report by “Okira Consulting”.

For example, Scotch Power reported losses of 250 million pounds ($300 million) from the home-selling electricity and gas sector, but Centuryia made losses from electricity, and 222 million pounds ($266.4 million) in profits from gas. .

“The problem is getting more and more difficult, and bad and bad energy bills are becoming so bad for companies that there is no quick fix,” said Josh Buckland, partner at Flint Global, a former government adviser on energy.

Biggest price shock

The Bank of England expected energy prices to continue rising, in what is known as the “largest price shock since the 1970s”; This leads to new rises in inflation rates, curbing economic growth rates, and hitting citizens’ purchasing power for years to come.

At the same time, the Energy Regulatory Authority fixes the price ceiling at certain limits; Protection for home consumers.

Ofgame plans to adjust prices 4 times a year; So companies hope to be allowed to pass the higher cost on to consumers.

However, the government had announced last February expectations of increasing its support for consumers, after it had allocated, earlier, a package worth 9 billion pounds ($10.8 billion), the individual gets support in the amount of 200 pounds.

In an interview with BBC television last week, Scotch Power CEO Keith Anderson described “the government is sending this activity to stages that they cannot handle” and called for a comprehensive and rapid change in government policies.

Download losses to consumers

Energy bills debts
Britain’s flag appears high – Image via Law & Trust International

The owners of companies that supply electricity and gas to homes in the UK believe that their failure due to market conditions, and the increase in bad energy bills, will eventually lead the government to pass on its losses to consumers.

The government estimated the losses of Pulp Energy, the largest energy provider in the United Kingdom, which declared bankruptcy at the end of last year, at 2.2 billion pounds ($ 2.6 billion).

Ofgame also estimated the additional cost to consumers as a result of 25 UK electricity and gas providers filing for bankruptcy; It estimated at 2.4 billion pounds ($2.9 billion), and indicated that it would carry it to their bills in the future.

The recovery from the Corona epidemic and the increase in demand caused oil and gas prices to rise to record levels. The situation worsened recently, with Russia’s invasion of Ukraine, the economic sanctions imposed by Western countries on the former, and the emptiness of the markets from the products of the two largest grain-producing countries; This has pushed inflation rates around the world, including the UK, to record levels, and it has reached the highest level in America in 40 years in recent months.

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