UK energy firms could get state-backed loans to take on customers

UK energy firms could get state-backed loans to take on customers

UK energy firms could get state-backed loans to take on customers

Officials look at emergency funding to help large energy firms rescue customers of suppliers that have gone bust

A gas hob

Energy correspondent

Last modified on Mon 20 Sep 2021 10.05 EDT

Energy companies willing to rescue the customers of rival suppliers that go bust amid the gas and electricity market crisis could get state-backed loans in a scheme under government consideration.

The Guardian understands that officials are looking at the emergency funding to help the UK’s large suppliers pick up potentially millions of unprofitable customers this winter as record prices threaten to decimate the energy market.

Five small suppliers have gone under in recent weeks, and another four are likely to collapse before the end of the month, but the number of company collapses is forecast to dramatically escalate as cold weather compounds the record wholesale price highs.

The business secretary, Kwasi Kwarteng, spent the weekend locked in talks with energy leaders and the regulator, Ofgem, to understand the scale of the crisis facing the industry.

The crisis talks continued on Monday to thrash out potential measures for the government to help protect households from the fallout of the market surge, which is expected to rip through the energy industry and take a toll on heavy industry and the food sector, too.

Kwarteng was expected to deliver a ministerial statement on the gas market crisis on Monday afternoon. He said on Twitter that his task was to “ensure that any energy supplier failures cause the least amount of disruption for consumers”.

Kwarteng also confirmed that the government’s energy price cap would remain in place. “Consumers come first,” he said. “We are looking at options to protect consumers, and meetings continue across government today and this week. In any scenario, we will ensure UK consumers have continuity of supply – through a supplier of last resort or a special administrator if needed.”

Ofgem has successfully appointed a “supplier of last resort” to pick up the customers left by failed energy companies in the past, and used the process again on Monday to appoint British Gas as the new energy supplier for nearly 350,000 customers left stranded when People’s Energy went under last week.

But the scale of supplier failures this winter is expected to overwhelm the regulator’s traditional channels, and may require government intervention to ensure that customers are not left without.

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A source close to the talks confirmed that state-backed loans could be offered to financially robust energy companies that could take on stranded customers, so that they could afford to honour the energy tariffs offered by their previous supplier, even if they were priced at unsustainably low levels.

Another option under consideration is the creation of a regulator-run “bad bank” style holding company to house loss-making customers that suppliers would not be willing or able to take on. This option may become necessary if medium-sized energy companies begin to fold, leaving millions of customers in need of a new supplier.

Bulb Energy, which has 1.7 million customers, is reportedly hunting for fresh investment to fund the company but is expected to struggle to find new backers due to the risky conditions in the market this winter.

One senior City source said Bulb had been looking to raise funds for some time, and there was no reason to believe the company was facing an imminent threat to its survival. But the company might find it more difficult than usual to convince investors to take a risk on the UK’s electricity market, the source added.

A statement from Bulb said: “From time to time we explore various opportunities to fund our business plans and further our mission to lower bills and lower CO2. Like everyone in the industry, we’re monitoring wholesale prices and their impact on our business.”

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