Alistair Dickson calls on government to take responsibility for regulating the energy sector

Alistair Dickson, head of SKSi Scotland, has called on the government to step in and stop energy companies overtrading.

This comes as Bulb Energy – the seventh biggest energy company in the UK - became the latest supplier to fall. Now planning to enter special administration, Bulb Energy’s 1.7m customers will continue to be supplied with energy this winter thanks to public funds.

So far, a total of 22 energy providers have ceased trading during the gas crisis.

Insolvency expert Alistair Dickson said:

“While the energy crisis looms large, many informed commentators believe this is only the beginning. This crisis has been allowed to grow for far too long, and now it’s too big to control.

With Bulb being the largest energy company to hit the buffers, it’s deemed too big to fail, and so it now finds itself in special administration to obtain protection from creditors and protect the supply of energy to its customers . Apparently, Bulb is believed to have too many customers to be absorbed by another energy business under the Supplier of Last Resort process usually relied on when an energy company fails.

Under that process a provider is required to take a competitor company’s problems on board – and in doing so they may speed up their own demise. it’s essentially catching a hand grenade. The Government won’t let consumers go without supply, but forcing customers onto an existing supplier may expedite more collapses.

Bulb may be “too big to fail”, but there are 22 energy providers which the government has not supported through a ‘special administration’ process. It’s inevitable this list will keep growing.
Bulb was suitably hedged and funded - but it still couldn’t survive. The UK industry is going to end up back where is started, with four or five big energy providers. The opening up of the market has completely backfired.

Going forward, the Government needs to prevent more of these energy companies being created in the future with inadequate funding, inappropriate hedging strategies and nonsense valuations based on the number of customers they had managed to sign up.

This crisis has major repercussions for both the public and private sectors.

There are examples of councils diversifying and buying these billing companies - what are the repercussions of this for a public sector already up to its armpits in debt? There’s a major reckoning coming.

Pensions will also be hit by this crisis, due to the level of investment by private equity firms.

The UK industry is completely beholden to Russia and high energy prices will become an annual event, unless Russia decides to drop its price.

We’re all hoping that once we come out of winter, market stabilisation will happen because there’s less demand for gas. But until we sort out our long-term supply agreement, we may have this problem every winter.

The Government should have stepped in a long time ago to stop energy companies from overtrading. These companies have proven to be unable to withstand market shocks. From nothing, they have enticed customers to switch with low fixed tariffs – effectively driving the price down for the benefit of the consumer.

This impending crisis has been ignored because all eyes have been on Brexit and the pandemic. With two 800-pound gorillas demanding all the attention, it was inevitable that we would walk into other crises. As the energy crisis unfolds it begs the question, what’s next? “