U.K. energy suppliers will start paying bills from April

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The UK's households will start paying the price of mass failures of the nation's power and gas suppliers as soon as April, after the regulators said surviving energy companies can start recouping losses sooner than planned.

Many energy supply companies went bankrupt earlier this year because wholesale energy costs soared across Europe and suppliers in the U.K. market had to absorb millions of customers, incurring billions of pounds in additional costs. In response to complaints from suppliers that they might have to wait 18 months to get reimbursed, the regulator Ofgem has moved forward the date that suppliers can start to recover claims via bills to April.

The net result is higher costs for consumers who are already facing a hike in the nation's price cap. The supplier exits will likely result in higher costs for all consumers, not just the households that switched supplier due to the way those costs are recovered.

In a letter published Wednesday by Ofgem s director of retail Neil Lawrence, Ofgem spokesman Neil Lawrence said that this is a difficult time for consumers who will face higher energy costs from April 1 when the price cap increases to reflect the current high wholesale price. We designed a faster levy process to protect consumers who have been affected by supplier insolvencies and all consumers who will have to pay these costs. The surge in wholesale prices to levels almost four times higher than usual for this time of year has wreaked havoc on the energy retail sector, which must adhere to regulated price caps for some customers. Inflation is making everything from food to petrol more expensive, which will result in higher energy bills for households.

According to an analysis by Investec Bank Plc, the cost associated with the collapse of these suppliers is about 3.2 billion pounds $4.3 billion. It is this tab that will start to be reclaimed from April rather than October as previously expected.

The supplier of last resort, or SoLR, needs to submit claims by December 6 and Ofgem will decide whether or not to approve them by December 17. This will allow networks to reflect levy claims in their charges from April and repay SoLRs from May.

It's likely that it will take 12 months for the full costs to be recovered, Ofgem said.

Changes that would allow costs to be recovered within less than 12 months would likely have a greater impact on consumer bills, network companies and other suppliers, and so would require more detailed analysis, the regulators said.

It said the accelerated process was temporary and to reflect extreme market conditions.

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