More UK energy companies likely to fail due to sharp rise in wholesale prices


The flurry of failures among the United Kingdom's household energy suppliers will continue, the rating agency Moody's said on Wednesday.
The United States business information analysts said household energy companies are going through a consolidation triggered by a sharp rise in global wholesale energy prices. The price rise has made the high-volume, low-profit business model of many UK participants unviable.
"More (failures) will follow with Renewable Obligation payments due in October," Moody's added; in reference to the UK government's largest renewable electricity support initiative, which funds around 30 percent of the nation's green power by charging companies that do not hit environmental targets.
The Reuters news agency said Moody's believes the UK's energy companies will also face "an increased risk of credit negative political intervention".
In the face of rising wholesale energy prices, nine British household energy suppliers went out of business during September. And around 20 have failed since the start of the year. The failures have heaped pressure on companies that are still trading because of a regulatory requirement that they accept customers from failed companies but that they cap fees and tariffs. Reuters said that means companies are unable to pass on all of the additional costs they are encountering.
The UK government is understood to be looking at a range of options that might improve the situation.
The Financial Times newspaper said the energy crisis has led to British households being quoted fixed-price annual electricity and gas contracts in excess of 2,000 pounds ($2,710). It is the first time they have been that expensive. The industry's regulator, Ofgem, said the average cost of such contracts, going back to 2009, has been 1,286 pounds a year.
The Guardian newspaper said the UK's energy crisis has opened the door to the European Union using energy as a bargaining chip in post-Brexit disputes.
The UK and the EU have been talking about potentially adjusting the Brexit divorce agreement that has managed their trading relationship since the nation left the bloc. But France has been infuriated by the UK's failure to grant fishing licenses to French vessels, something it says is guaranteed in the deal.
With France wanting to put pressure on the UK, the nation's EU affairs minister, Clement Beaune, suggested the bloc could limit the UK's access to energy.
And now, The Guardian newspaper reports, Jean Castex, France's prime minister, appears to have endorsed the idea in the national assembly.
"The (European) Commission is moving; it must do more", he said. "We will use the arbitration panel … to force the British to respect their word … But also, if necessary, (we will question) the bilateral cooperation that we have with the United Kingdom in many areas."
The UK imports much of its electricity from French nuclear power stations.