U.K. Bills To Rise by Extra £85 After Bulb Collapse, Ofgem Says

(Bloomberg) --

U.K. households, already bracing for their energy bills to rise by “several hundred pounds,” will see a further jump following the collapse of Bulb Energy Ltd. and other suppliers, the regulator said.

The U.K.’s energy crisis has led to the collapse of more than 24 suppliers and the first forced nationalization since 2008. That will cost the average household an extra 85 pounds ($112) next year.

Ofgem said the collapse of Bulb Energy Ltd. and other suppliers will add between 80 and 85 pounds to energy bills through 2022 and 2023, in its first public estimate of the cost of the crisis. Ofgem made the disclosure in a new legal filing where it also warned that any large supplier taking over Bulb’s customers could have triggered competition concerns.

A court appointed a special administrator to Bulb, the country’s seventh-largest supplier last month, with the government saying it will put up 1.7 billion pounds to support it. In its legal filing, Ofgem estimated that allowing Bulb to be rescued by large supplier would cost 1.3 billion pounds.

Ofgem said that it decided to appoint a Special Administrator for the first time in the energy industry because of concerns that an existing supplier would struggle to absorb Bulb’s 1.7 million customers and a failed attempt could lead to its own bankruptcy.

U.K. households will start paying the price of mass failures of the nation’s power and gas suppliers as soon as April.

Energy retailers are struggling after a four-fold increase in the price of gas this year. Many smaller suppliers have been caught out by being unhedged and are stuck supplying energy to their customers at a lower price than they can buy it for in the wholesale market. 

Ofgem’s estimate is much lower than analyst estimates. The costs associated with the collapse of suppliers including Bulb stand at about 3.2 billion pounds, according to analysis by Investec Bank Plc. That’s 120 pounds a household, on top of the increase in wholesale natural gas and power prices that will be passed on as well.

The documents were disclosed following a court request by Bloomberg News and the Financial Times. Ofgem corrected its estimate of the additional household cost on Dec. 2. It had previously suggested that bills could rise by as much as 200 pounds.

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