Why Are Energy Suppliers Going Bust or Ceasing to Trade?
Firstly, it’s important to establish the difference between going into liquidation (or going bust) and ceasing to trade.
When a supplier goes ‘bust’, it’s removed from the Companies House register, its assets are sold off to repay any creditors it might have outstanding debts with and it closes for good.
When a supplier ceases to trade, it can still remain as a limited company even if it isn’t currently trading – effectively remaining dormant.
For many suppliers, the reason they’ve had to cease trading or have gone bust is purely because of the rising prices on the wholesale market. By early 2022, the price of natural gas has risen by more than 300% compared to the same period in 2021.
Ofgem’s domestic price cap also stipulates that energy suppliers can’t charge more than the set amount for the energy they sell to customers. This has meant many companies have been faced with selling gas and electricity at an unsustainable loss – because the wholesale market prices are so high right now.
Additional suppliers face levies from the government, such as the Renewables Obligation. When suppliers can’t or don’t pay these levies, they face having to pay a fine – which can be quite substantial.