The first casualty of Britain’s recent gas supply shock has emerged after a small supply start-up said it would need to close due to tough energy market conditions.
The closure of Brighter World Energy comes just weeks after the UK gas market rocketed to five-year highs, raising fears of a financial crunch for small suppliers.
The energy minnow, set up a little over a year ago, said it had made the “difficult decision” to shut the business because market conditions had made its ‘buy-to-give’ business model unsustainable.
The supplier had hoped to set itself apart within the crowded energy supply market by promising to help install a solar-powered micro-grid in an African village for every 2,000 customers it signed up.
“We have taken the tough, but responsible, decision to close at this time, because we no longer believe that market conditions, or our underlying operation, make for a sustainable business model in the long term,” said Cheryl Latham, the supplier’s chief executive, on the supplier’s website.
The gas price shock, which ripped through the market at the end of last year, has reignited fears that smaller suppliers may fold under the pressure of higher costs.
The risk of a gas supply crisis was sparked last month by the emergency shutdown of the UK’s most important North Sea pipeline amid technical issues in Norwegian waters. The next day a deadly explosion at a key European gas hub compounded fears and drove prices higher.
In the wake of the market surge it emerged that Flow Energy and Spark Energy both missed a payment deadline for their share of a Government scheme that helps vulnerable customers pay their winter gas bills.
But the aftershock is likely to hit standard energy account holders too as suppliers begin to raise tariffs to meet the higher costs.
One of the market’s fastest growing new suppliers is understood to be on the brink of announcing a significant tariff hike for its newly won customers, according to industry sources.
Already Good Energy has delivered a hike of 7pc for 70,000 customers just before Christmas, and Toto Energy raised its standard variable tariffs by 22pc. The minnow also angered customers by calling for a 50pc hike from their direct debit customers on fixed tariffs, before backing down from the ‘seasonal’ winter price change, saying it was a “misprint”.
Senior industry sources have consistently warned that the market is vulnerable to dramatic energy price spikes, because small suppliers often offer rock-bottom energy prices without the financial backing to absorb a market shock.
A spokesman for the industry regulator told the Sunday Telegraph last month that it was monitoring the market for wider financial risks to suppliers, including price increases, and is also closely monitoring individual suppliers with a focus on financial indicators.
Brighter World’s customers will be passed on to its partner company Robin Hood Energy, a not-for-profit supplier, with no change to their contract terms or account balances. Brighter World will also waive any exit fees for those customers who would prefer to leave Robin Hood.