GB Energy Supply ceases trading as energy rates continue to rise
Why are GB Energy Supply in the news?
The last energy suppliers to go bust were 8 years ago when Bizz Energy and Electricity4Business stopped trading in 2008. Now, with energy costs increasingly rising this winter with little flexibility for better rates, another supplier has found itself in a similar position.
The costs seem to have had a detrimental effect on GB Energy Supply which collapsed on Saturday leaving some 160,000 people in a potentially unstable position, with the company’s cease in trade being blamed on recent rises in energy prices.
In a letter on the GB Energy Supply website, managing director Luke Watson said: “Due to swift and significant increases in energy prices over recent months and, as a small supplier our inability to forward buy energy to allow us to access the best possible wholesale prices, means that the position of the business has become untenable.”
OFGEM has quickly reached out to customers to make it clear that they will be protected as much as possible with provisions put into place to stop customers being cut off and to protect their credit balances. They are encouraging customers to take a meter reading and wait until their new supplier contacts them.
Today, OFGEM revealed that Co-operative Energy have been given the go-ahead to take on all of GB Energy Supply’s domestic customers after a ‘competitive process to get the best deal possible.’
“Our advice for customers of GB Energy Supply is to wait until Co-operative Energy contacts you. They will give you more information about the tariff you are on, and about your credit balance,” said Ofgem’s senior partner for consumers and competition Rachel Fletcher.
What does the collapse of GB Energy Supply mean for small business owners?
While these processes instigated over a month ago will mean that customers get their credit balances back, a big concern is that thousands will be moved to ‘deemed rates’. Deemed rates are applied when a tariff runs out or is no longer in use and are these rates are often based on a much higher rate than an agreed tariff price.
GB Energy Supply customers: What should you do now?
Small businesses are set to be hit hardest as their credit balances are more vulnerable and less protected than those of domestic customers. Switching to a competitive rate as soon as possible means that small business owners can lock in rates before prices continue to increase. Wholesale prices of both electric and gas are set to rise so getting a fixed rate now is crucial.
When a supplier is changed, energy bills are likely to rise. This is because the new supplier doesn’t have to put you onto its cheapest tariff automatically. However, CEO of Co-operative energy, Ben Reid promises ‘We will honour your current contract and price until it is due to expire. This means you do not need to do anything and, rest assured, we will contact you again before your current contract ends with all the information you need and what to do next.’
In order to err on the side of caution, we would recommend that you ask for their cheapest deal and use an impartial and independent switching site such as Exchange Utility to compare gas and electricity deals to find the best tariff prior to accepting any agreements.
Prices for renewal may be higher than what have previously paid because of the increase in wholesale price. However, with prices continuing to rise at least you will know that you’re on the best available tariff and you can lock down a fixed process before rates get even higher.
What does this mean for other smaller suppliers?
Although wholesale energy prices may have been the primary reason that GB Energy Supply ran into difficulties, this doesn’t necessarily mean that all smaller suppliers are at risk. However, with small suppliers now taking 15% of the market (and growing), a similar situation cannot be completely ruled out.
When switching, customers must also consider service, billing, financial stability and innovation in their choices, as well as price. New suppliers play an important role in the industry and are responsible for much of the competitive innovation and new ideas within the sector. Consumers should not be put off from switching.