Energy supplier market almost halves in 2021

It comes off the back of the latest round of supplier exits from the market. Over the past few days, Omni Energy, MA Energy, Zebra Power, Ampoweruk and Bluegreen Energy - which have a combined total 27,300 domestic and more than 2,000 non-domestic customers - have ceased trading.

Under Ofgem’s safety net rules, each of the company’s customers’ energy supply will continue and, where they’re in credit, the funds that domestic customers have paid into their accounts will be protected. Domestic customers will also be protected by the energy price when being switched to a new supplier through regulator Ofgem’s Supplier of Last Resort scheme.

According to research from Cornwall Insight, at the start of 2021 the UK’s domestic energy market had 47 domestic suppliers - five large, 12 medium and 30 small. This has fallen by nearly half with 25 suppliers remaining in the market.

Energy companies have been heavily hit by the current gas price crisis. This has resulted in Ofgem’s energy price cap going up by £139 for people on a default tariff - from £1,138 to £1,277 - while prepayment customers saw an increase of £153 - going from £1,156 to £1,309.

Of the customers who have lost their provider, the majority have - according to Cornwall Insight - been moved to larger suppliers. This, in turn, has grown the market share of the larger supplier from 68.5% at the start of the year to 70.1%.

Commenting on the research, Cornwall Insight’s head of consumer markets said: “Suppliers are likely to face tough times ahead. Credit calls on suppliers for electricity balancing are due to increase markedly. The Credit Assessment Price (CAP) will increase further to £259/MWh on 4 November – a record high and the tenth increase in the CAP in 2021.

“This is further compounded by high futures prices for the remainder of winter, consistently over £230/MWh for monthly baseload power and 240p/th for monthly NBP gas on 1 October. As a result, trading arrangements with wholesale trading parties are critical to the retail parties’ survival to reduce exposure to uncapped imbalance prices.

“Terms which the suppliers will find acceptable may not be forthcoming as wholesale counterparties will be concerned about the long-term viability of businesses whose input cost is higher than their incoming revenue.

“Those without longer-term deals in place may be forced to pay up-front, offer additional collateral (either in cash or equity), or buy on spot markets, increasing pressure on cash flow management.

“The very high wholesale prices have caused significant distress even before winter begins and how suppliers fare is in the hands of wholesale trading parties, and how suppliers can manage their costs through the winter months ahead.”