Scottish Power Boss Slams 'Regressive' Price Cap, Warns of Energy Supplier 'Massacre' in UK

Ofgem - Sputnik International, 1920, 21.10.2021
A new, higher cap on energy prices and charges that suppliers can levy took effect on 1 October as per regulator Ofgem. However, against the backdrop of soaring wholesale gas prices in recent months, the cost for companies to buy energy is higher than the price they charge, causing dozens of suppliers to go bust.
The chief executive of Scottish Power – Britain's fifth largest energy supplier – Keith Anderson, has called for the abolition of the “regressive” price cap, while slamming regulator Ofgem's perceived failings amid the current energy crisis, reports Sky News.
The cap, reviewed by the Office of Gas and Electricity Markets (Ofgem) twice annually, limits the cost of energy on suppliers' default tariffs. Its newly-revised limit started on 1 October. The cap has now risen for those on standard tariffs by £139 a year, from £1,138 to £1,277 a year, and will be reviewed again by Ofgem in six months’ time.
Ofgem - Sputnik International, 1920, 21.10.2021
People with prepayment meters have on average been confronted with an annual increase of £153 – from £1,156 to £1,309. However, as wholesale prices spiked this year, driven by a succession of factors, such as economies reemerging from COVID-19-imposed lockdowns and high demand for liquefied natural gas (LNG) in Asia, firms have been buying gas at a considerably higher rate than they were allowed to sell.
Anderson described the “one-size-fits-all” price cap as a “politically” popular idea which, under the current volatile situation, has resulted in dozens of companies collapsing.

"We expect, probably in the next month, at least another 20 suppliers will end up going bankrupt. We are now going to start seeing some relatively well-run, good, commercially sound businesses going bankrupt because they just can't pass the cost of the product through to customers," Anderson said.

The chief executive of Scottish Power accused Ofgem of "not keeping pace with what has been going on in the marketplace." According to him, Ofgem and the government should intervene and review the cap, otherwise "we are in danger of just sleepwalking into an absolute massacre."
Around 13 UK suppliers have collapsed in recent months, with Ofgem confirming that GOTO Energy Limited, Daligas Limited, Pure Planet, and Colorado Energy as the latest casualties. In pre-crisis times, Anderson said there had been a “fixation about trying to create more and more competition into the energy sector."

"It went too far. We ended up with a raft of small, not particularly well-run organisations coming into the retail sector. This crisis has shown this is quite a risky business," he added.

As the bigger companies are forced to take on millions of customers from failing energy suppliers, Anderson predict that "every customer taken on at the price cap means £1,000 of cost. We estimate the total cost to the industry of between £4-5 billion.”
Unless urgent measures are taken, Keith Anderson warns that the market could effectively “shrink all the way back to five to six companies." Ofgem data shows that six well-established UK energy companies – Centrica's British Gas, E.ON, OVO Energy, EDF Energy, Scottish Power, and Octopus – currently wield control over more than three quarters of the nation’s gas supply market.
In response, Ofgem was cited as accepting the need for change while saying the price cap had been instrumental in cushioning millions of households from surging gas prices.
"Ofgem, with industry and the government, will need to build an energy market that is more resilient to shocks like this in the future. This is likely to mean an approach to regulation which is more focussed on the business models that enter and operate in our energy market, and on the risk they carry," stated the regulator.
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