Uk domestic energy providers hit by soaring prices

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Uk domestic energy providers hit by soaring prices

Britain's domestic energy providers have suffered a string of bankruptcies in recent months, with Bulb the latest to see the lights go out this week.

Since August, the number of UK suppliers has almost halved, ravaged by sky-high global wholesale costs and local factors like the so-called energy cap.

As the cold winter approaches, it is becoming harder to pass on spiralling costs to consumers due to soaring fuel bills.

A total of 25 British suppliers have gone bust since August, plagued by surging wholesale prices for gas and electricity.

Just 28 providers still standing are still standing after the dramatic collapse, according to regulator Ofgem.

Bulb, the nation's seventh biggest supplier of food, went bust on Monday, triggering special intervention to protect the near 1.7 million households it serves.

The government has set aside nearly 1.7 billion $2.3 billion, 2.0 billion euros to ensure that Bulb stays on.

Customers from other smaller failing suppliers have been taken over by larger rivals because of a separate bankruptcy process.

Even higher fuel bills hurt the poorest households the most, according to analysts.

Europe has been negatively affected by the rise in energy prices due to resurgence post-pandemic demand, the arrival of the colder northern hemisphere winter and stubborn fears over key Russian supplies.

Some providers have gone bust or restructured activities in France and Germany.

Britain is more vulnerable due to its greater reliance on natural gas and insufficient gas storage facilities.

The government is attempting to increase renewable and nuclear power to meet its net zero carbon target in 2050.

The growth of the wind sector has been hampered by recent calm weather.

The UK is more dependent on gas for power generation than many European countries and is less integrated into a supranational energy market, according to professor Veronika Grimm at Nuremberg's Friedrich-Alexander University.

In Europe, for example, price increases were cushioned by the common electricity market - but here the burdens were noticeably high, she told AFP.

The liberalisation of Europe's domestic energy market in recent decades, particularly in Britain in the 1990s, has been highlighted by experts as a key factor behind the turmoil.

That stimulated competition and encouraged many new smaller entrants who lacked the financial clout to survive sky-high wholesale costs on a sustained basis.

Grimm said there was a strong focus on competition and market entries.

There are many small companies in the market that can't cope with temporary pressures, such as the current price increases. In an attempt to ease consumer pain, Britain's energy providers have been hurt by government moves to cap prices.

In October, Ofgem raised the energy cap which limits providers' standard variable tariffs, and this is set to rise even higher in April.

Providers are vulnerable to a spike in wholesale energy costs because of the cap.

The price caps, which are supposed to protect consumers from price increases, mean that companies get into trouble when gas prices rise as they do, according to Grimm.

Stress tests could be needed in the future to make sure that companies entering the market are well positioned. Many Britons fix electricity and gas rates with providers for a set period of time, but these are also increasing sharply.