The energy sector is bracing itself for big change due to a rise in wholesale gas prices.
A handful of energy companies have already gone bust with more said to be in trouble over the coming weeks ahead of the UK’s winter months.
Prices have increased significantly since the start of the year, with industry group Oil & Gas UK reporting a 250% increase in wholesale gas prices since January.
Here’s why wholesale gas prices are rising across the UK, which energy suppliers have already gone bust, those now in trouble - and if Octopus Energy is one of them.
Why are wholesale gas prices rising?
A combination of factors fronted by a high global demand have seen gas prices soar of late.
Planned maintenance work on electricity plants has meant around 25% of the UK’s nuclear power stations are currently offline.
While a dip in the energy produced from solar and wind sources, due to recent weather, has also played a part in the balance between supply and demand.
Households have been protected from shouldering the immediate cost by the government’s energy price cap - the maximum price customers can be charged.
Though the cap is set to rise by £139 a year, from £1,138 to £1,277 a year, starting from 1 October 2021 and will be reviewed again by Ofgem in six months’ time.
Which energy suppliers have already gone bust?
The rise in wholesale gas prices coupled with the consumer energy price cap has meant suppliers are taking on the initial financial strain.
This has caused problems for smaller UK energy companies who can’t take the financial hit in the short term or pass the cost on to its customers due to agreed tariffs.
Government officials held urgent talks with energy suppliers over the weekend to find a path forward, with five companies already biting the dust in recent weeks.
Utility Point and People’s Energy went bust on 14 September, a week after PFP Energy and MoneyPlus Energy went, following HUB Energy on 9 August.
New suppliers have been found for four of the five firms to have gone bust, with industry regulations ensuring energy supply will continue for affected customers.
Will Octopus Energy go bust?
As a fairly new energy supplier, founded in 2015, there has been customer concern over the future of Octopus Energy Group.
Though it may be a relatively new supplier, in comparison to some of the industry’s heavyweights, Octopus Energy has already become well-established.
The British company has more than 2.4 million domestic and business customers, with operations in the UK, Germany, Australia, Japan, New Zealand and the US.
Its founder Greg Jackson reassured customers Octopus Energy was here to stay.
In response to a question raised on Twitter over the company’s future amid the energy price hike, Mr Jackson explained Octopus Energy was "fine".
His post read: "No - as a global, very well backed company we’re fine but plenty more are not. There’s no glee in seeing other companies fail which is why we’ve launched a special recruitment drive to help some of those losing their jobs in those companies."
Industry experts have cautioned there could be as few as 10 energy suppliers left by the end of 2021 - down from 70 companies at the start of the year.