Energy supplier bankruptcy wave across Europe and fewer contract options

The ongoing wholesale price rally is putting enormous pressure not only on end-users but also on retailers. Smaller energy suppliers are the most affected and are being forced in several cases to leave the market unable to withstand the minimum or negative margin and operating in loss. At the same time, it is being observed that larger suppliers choose to stop accepting new customers, while withdrawing many of their contracts in order to minimize their exposure to the soaring prices and consequently mitigate their loss.

The list [1] of energy providers leaving the market is constantly increasing in the UK [2], with 10 more suppliers already leaving in November. In the last three months, 23 British suppliers went out of business, unable to find a way forward amid rising costs due to the rally on the wholesale market. In the same way, Bulb Energy, which serves about 1.6 million customers, entered a special administration regime on 24 November, in order to protect its services to its customers. Special administration is a process designed to protect the customers of a large energy supplier that has become insolvent.

In Amsterdam, significant price increases in both electricity and natural gas markets took place this month as a result of major Dutch suppliers recently offering less and more expensive contracts [3]. At the same time, there have been already two cases that supply licence has been withdrawn from suppliers [4]. Initially, Welkom Energie declared bankruptcy in late October, forcing its 90,000 customers to move to Eneco, under new more expensive contracts. In November, Enstroga, another smaller retailer, collapsed, after attempting to increase its consumers’ fixed tariffs, resulting in the regulatory authority (ACM) revoking its licence. For what is to happen in the near future, the biggest Dutch energy suppliers have already announced their energy rates for 2022, with additional increases.

The phenomenon is getting distinct also in Germany [5][6], as smaller suppliers such as Otima Energie, Rheinische Immergrün, Smiling Green Energy and Lition Energie have already terminated their supply contracts with their customers unable to bear the massive pressure from rising costs. On the other hand, the biggest energy suppliers in the country, such as E.ON and EnBW, are temporarily withdrawing their contracts from price comparison tools, avoiding new customers. As a consequent of fewer and more expensive available options in the natural gas market, end-user price in Berlin has increased by 78% in November. The situation is expected to get worse, as the largest gas suppliers, GASAG and EnBW, already announced further price increases from January 2022 onwards.

Author: Ioannis Korras, Energy Market Analyst

Sources:

[1] Ofgem: “Check who’s taken over your energy supply”, 21.10.2021

[2] HEPI: “UK consumers and suppliers face hardships as energy prices soar”, 02.11.2021

[3] Radar: “Hoge tarieven en weinig keus op energiemarkt, ondanks dalende gasprijs”, 05.11.2021

[4] Radar: “Energiebedrijf Enstroga ook kopje-onder door flinke gasprijzen”, 09.11.2021

[5] Agrarheute: “Energiekrise: Energie-Versorger gehen pleite und kündigen Verträge”, 18.10.2021

[6] Wiwo: “Nächster Stromversorger meldet Insolvenz an”, 29.10.2021