Energy crisis: More suppliers go up in smoke after surge in wholesale costs

The demise of two more energy companies has been confirmed as the surge in wholesale gas costs this year drives up bills for providers and households alike.

Sky News had revealed on Tuesday that up to four suppliers were in talks with the regulator about entering its Supplier of Last Resort (SOLR) mechanism.

Pure Planet and Colorado Energy said they had ceased trading on Wednesday evening and Ofgem later confirmed their respective customer bases would be allocated a new supplier in the coming days.

BP-backed Pure Planet, which has 235,000 households on its books, ran into difficulty when the energy giant refused additional funding.

Colorado Energy had just 15,000 customers.

The regulator’s statement said: “Under Ofgem’s safety net, customers’ energy supply will continue and funds that domestic customers have paid into their accounts will be protected, where they are in credit.

“Domestic customers will also be protected by the energy price cap when being switched to a new supplier.

“Customers of these suppliers will be contacted by their new supplier, which will be chosen by Ofgem.”

The demise of Pure Planet and Colorado means that 14 small suppliers have collapsed this year – 11 of them over the past six weeks.

They have been hurt by business models that expose them to near-term delivery contracts for raw energy which have shot up – by more than 500% at one stage this year – because of a range of pressures on supply Europe-wide.

They include gas storage shortages after a cold end to last winter and stiff competition from Asia to replenish stocks.

In the UK, poor weather conditions for wind generation have raised demand and a fire at a power interconnector with France in Kent last month are also contributory factors.

The consequences of the energy crunch have been wide-reaching before winter even hits.

It has left consumer experts saying – for the first time ever – that falling under the energy price cap is currently the best way to avoid immediate surges in bills.

Households are automatically placed on a so-called default tariff once a fixed-rate contract concludes.

It stands at an average £1,277 for an annual bill while new 12-month fixed-rate deals are currently at more than double that level.

However, Ofgem has warned that the cap level would be expected to rise sharply in April following its next review, to reflect the rise in wholesale costs.

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