Energy Suppliers call for Government Bailout as more businesses and households struggle to pay bills

As such, several of the largest energy suppliers have called for a pre-emptive government bailout. Previously, it seemed as though such a call would not be made as the energy sector was in a far better position than say the hospitality or entertainment sectors. 

Energy suppliers that solely provided energy to businesses have seen their incomes plummet as demand has tumbled by as much as 60% or 70% during the lockdown. 

Some businesses are incurring no charges at all, due to the complete shutdown of their offices or premises whilst others that hadn’t paid their bills for energy consumed before the lockdown are likely to default on those.

“That’s a problem. They’re closed, and no one is at the office. You can send as many emails as you like, if the guy doesn’t want to pay his bills he won’t reply and he won’t answer the phone,” 

Suppliers that provide to both businesses and domestic properties, however, have been able to survive due to the spike in domestic demand.

Separately energy suppliers are locked in discussions with Ofgem about potential financial support to head off the collapse of some of the weaker electricity and gas providers as businesses and households  default on their energy bills.  

Ofgem is reportedly exploring a deal that would allow energy suppliers to defer payments they would normally make to network companies, such as National Grid, UK Power Networks, SSE and Scottish Power, that cover the cost of maintaining electricity and gas networks. 

As a result, more domestic energy consumers have resorted to cancelling their direct debit payments as they struggle to pay their bills. 

Industry experts are also warning that many energy suppliers are ill-equipped to ride out the turbulence heading their way.

Another issue faced by energy suppliers is that Ofgem has warned them to halt debt collection activities during the outbreak. Despite this, some suppliers found themselves in hot water and making negative headlines after continuing to send out bailiffs to collect on unpaid debts. 

The industry watchdog has told energy companies to halt debt collection activities during the Covid-19 crisis, limiting the ability of suppliers to chase late payments.

Read more: Some Energy Suppliers shamed for threatening customers with bailiffs during Covid-19 Pandemic

The sharp decline in demand for energy has had negative impacts on many energy suppliers with one of the biggest reportedly provision £60 million for bad debts. How smaller suppliers will deal with this remains to be seen.

 

Industry experts in April (the first payment period after the imposition of lockdown) saw only a small increase in the number of cancelled direct debit payments. 

However, as the months have gone on and the economic damage rises, some are warning that with unemployment rising so quickly, a wave of cancellations is likely to come. 

Shortly after the start of the lockdown, there were calls for a Government-backed loan scheme worth £100 million a month to allow energy customers a payment holiday. 

Read more: Disagreement between Energy Suppliers on the need for a government bailout

Opponents to that idea argue that the bailout will just allow badly run businesses to be bailed out at their and the taxpayers’ expense.

“Without help, we’re set for a bloodbath, but I believe that they will want to avoid a surge in bankruptcies of energy retailers by offering them financial support or by offering cash directly into business customers affected by the crisis. I prefer the latter option as it will avoid supporting reckless and inefficient suppliers.”

Dyball Associates are proud to help new and existing supply businesses successfully launch and thrive in the UK market.

Through our energy market consultancy services, and the software we’ve developed, we’re supporting new UK electricity and gas suppliers get set up and start supplying.

For more information on how to start and manage an energy company, get in touch with Dyball Associates today.

Follow us on Twitter and LinkedIn to keep up to date with the latest news and updates in the energy industry.