Energy Bills to Rise By £200 for Every UK Consumer Says Centrica Boss

UK consumers will see up to £200 added to their energy bills as a result of the failure of gas supplier companies and the subsequent transfer of their two and half million former customers to solvent providers.

That’s the unsettling news from Centrica boss Chris O’Shea. Centrica is one of the UK’s largest gas providers and has its origins in the publicly owned utility British Gas in the 1980s.

Energy bills already £138 higher before latest price blow

Even before this latest news, households on a standard tariff and typical usage have seen bills go up £139 to £1,277 per annum as a result of an energy crisis that has led to rocketing gas prices.

In comments provided to a House of Lord Industry and Regulators select committee chief executive O’Shea said that bills are already set to rise by £100 but could end up being double that amount.

“The current retail market failures will put £100 on the bill of every single home in the UK, whether it’s a house in Belgravia or a studio flat in a deprived area of Glasgow,” O’Shea said.

“It’s not unreasonable to expect that to double in the next few weeks; Ofgem [the regulator] have been quite clear that they expect many more suppliers to go out of business,” he added.

16 suppliers have gone out of business affecting two and a half million customers

Sixteen suppliers in the retail market have already gone out of business due to the pincer movement of sky high wholesale prices for natural gas combined with a price cap that prevented those that had not hedged their positions in the market from raising prices.

Supply chain disruption, that saw a fuel crisis in the UK caused by driver shortages and panic buying, is also adding to the demand pressures in the energy market, pushing prices ever higher.

“There’s a systemic risk in terms of participation in the energy retail market,” O’Shea explained.

Centrica has both a consumer and upstream production segment to its business. As one of the largest providers it has had to take on thousands of new customers in compliance with the regulations for dealing with company failures in the sector.

The UK has one of the least regulated energy markets in the world, with an operator able to set up as a provider with limited capital resources and without owning any of the supply infrastructure.

Now the most financially exposed firms are going to the wall, with the number of failures set to continue mounting as the colder winter months approach.

Centrica’s O’Shea demands tougher regulations, greater accountability

Centrica will be losing money for each new customer it is force to take on and not surprisingly wants to see new rules introduced to regulate the market.

Even before the current crisis, Centrica’s operating profit was negative in 2020, showing a loss of £362 million and a meagre net profit of £41 million, as the Covid pandemic hit demand.

However, its trailing twelve month net profit is a much healthier £1.58 billion but 2021 year end net profit is expected to be £197 million.

O’Shea wants regulators to put in place rules that force providers to have much greater capital on hand as well as new measures governing risk management and the protection of deposits made by customers.

Many customers will build up surplus funds held in the providers’ accounts during the summer months and this has been a source of worry for the two and a half million consumers who have been transferred to new providers.

The Centrica boss is also demanding that the management teams, in particular the directors, at the providers that have failed be held to account for their actions.

O’Shea estimates that because of the current high price of gas, there is a large gap of between £700 and £1,000, between prices paid and what it can charge the newly acquired customers.

The total amount of the loss is around £2.5 billion spread across all existing suppliers and will ultimately be paid by all retail energy consumers into next year and 2023.