Energy suppliers will go bust “within three months” without urgent government support as wholesale gas prices surge, the chief of one firm with one quarter of a million customers has warned.
Peter McGirr, the CEO of Green energy, said the government had offered “no support” to struggling smaller firms who were teetering on the brink of financial collapse despite the prime minister’s pledge to help them navigate a “difficult period”.
Four small energy companies have already failed in recent weeks due to a sudden increase in gas prices worldwide. Wholesale gas prices in the UK have tripled this year after the global economic recovery from the Covid-19 pandemic prompted a spike in demand.
Kwasi Kwarteng, the business secretary, is currently locked in crisis talks with industry leaders to support energy firms threatened by the price hike. However, Mr McGirr accused the minister of prioritising the future of larger firms.
“You don’t even need to look at the next six months, I would say the next three months will be curtains for us. We will not survive without any support,” he told The Independent.
“Unfortunately we will exhaust all our options in terms of raising finance unless there is an offer from the government, which it doesn’t look like there will be.
“We will have no choice but to fold the company. At this present moment it feels like the business secretary is very happy with that.”
Green was founded in 2019 and now employs 185 staff. Mr McGirr said his firm had repeatedly approached officials at the Department for Business, Energy and Industrial Strategy (BEIS) for assistance in the past few weeks but had received no pledge of support.
“What’s very frustrating is the government is putting out the narrative that there has only been an energy crisis in the past couple of days, but that’s not the case. This is the culmination of a number of factors leading back towards the pandemic,” he said.
“How could I - and other small suppliers - have possibly hedged for a lockdown in March last year? This is not because I haven’t run my business prudently, as some have suggested about small suppliers.
“We can’t buy energy in advance for a 20 per cent uplift in energy for kids that will be sitting inside playing PlayStation or professionals who have been forced to work from home.”
There are currently around 70 energy suppliers in the UK, though industry sources warned the BBC this could fall to as few as ten by the end of the year.
When a supplier fails, energy regulator Ofgem moves customers to another retailer to ensure that supplies continue and they do not lose money. A new supplier is then responsible for taking any credit balances a customer may have from their previous account.
Mr Kwarteng has previously said that consumers will be protected from price hikes through the Government’s cap on bills.However, Mr McGirr warned that the cap puts pressure on suppliers as they are not able to pass on cost increases fast enough.
“What we provide may seem minor in energy terms but we have a quarter of a million customers. When you include all the other small suppliers, you’re talking about millions of people that will feel the financial effect of this,” he said.
“Many of our customers are on fixed-term contracts. As soon as they come out of these then they may have to go to a much higher tariff rate at another supplier.
“If someone can’t afford to switch on their heating during the winter, people will die. Fuel poverty is already at an all-time high and I worry that the government is putting nothing in place.”
OGUK, representing the offshore oil and gas industry, reported wholesale prices for gas have surged 250 per cent since January - with a 70 per cent rise since August alone.
Mr McGirr is one of 15 CEOs of small suppliers to sign an open letter to the prime minister and the business secretary on Monday calling for “immediate discussions” to address the crisis.
It claims that current discussions being held about a support package are focused “solely on the largest energy suppliers in the UK”.
It adds: “We feel our voice, as suppliers of all different sizes, has not been heard. Yet we are all in the market together and experiencing the same conditions, if not exacerbated due to our size with access to financial support lines.”
The letter also claims that Ofgem is “currently unfit to regulate” the industry and accused them of “turning a blind eye to the market returning to a selective monopoly and a reduction in competition”.
The rise in gas prices has been blamed on a number of factors, including a cold winter that left stocks depleted, high demand for liquefied natural gas from Asia and a reduction in supplies from Russia.
Boris Johnson on Thursday made clear that the government is ready to step in to avoid the failure of further energy firms, but stressed the supply crisis was likely to continue for some months yet.
“I have no doubt that supply issues will be readily addressed,” said the prime minister. “We’re very confident in our supply chains.
“But in the meantime, we will work with all the gas companies to do whatever we can to keep people’s supplies coming, to make sure they don’t go out of business and to make sure we get through the current difficult period.”
An Ofgem statement said: “Ofgem continues to work closely with government and industry to ensure consumers continue to be protected while global gas prices are high and will speak further on these issues at the industry roundtable today.”
A BEIS spokesperson said: “Protecting consumers is our primary focus and will shape our entire approach to this issue. It is too early to say whether any financial support will be necessary, but we are monitoring this situation extremely closely.
“The Business Secretary is in close contact with the energy industry on the impact of high global gas prices, having met senior figures over the weekend, and hosted a roundtable with the energy industry and consumer groups this morning to speak further and to plan a way forward.”
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