29 energy suppliers failed between July 2021 and May 2022

Twenty-nine energy suppliers failed between July 2021 and May 2022, affecting nearly four million households in the UK, according to a National Audit Office report on the energy supplier market published on 22 June 2022¹. The failures followed a rise in wholesale gas and electricity prices to unprecedented levels between mid-2021 and spring 2022¹.

The NAO sets the failures against a decade of rapid market expansion. The number of domestic suppliers rose from 12 in December 2010 to a peak of 70 in mid-2018, before falling to 23 in May 2022¹. By September 2021, newer entrants held around 40% of market share¹. In 2019, the Department for Business, Energy & Industrial Strategy introduced a price cap on some types of tariff, which Ofgem has been required to operate since¹. The NAO says the price paid by a typical customer buying energy by direct debit at the cap will have increased by 78%, from £1,105 per year in the winter of 2018-19 to £1,971 in the summer of 2022¹.

The report concludes that Ofgem could not have prevented the 2021 wholesale price rise from significantly affecting consumers, but that it did not do enough beforehand to make the sector resilient to external shocks¹. It says that by allowing many suppliers to enter the market with weak financial resilience, and by failing to imagine sustained volatility in energy prices, Ofgem allowed a market to develop that was vulnerable to large-scale shocks, with the risk largely resting with consumers who pick up the costs of failure¹. It adds that Ofgem operated the supplier of last resort process effectively, ensuring households faced no disruption to supply, but that the number of failures means a significant additional cost on every bill at a time when wider cost increases are already causing major financial challenges for many households¹.

Why it matters for households

The nearly four million households whose supplier failed between July 2021 and May 2022 were moved to a new supplier through the supplier of last resort process, and the NAO says they faced no disruption to supply¹. The costs of those failures are added to bills, which the NAO describes as a significant additional cost on every bill at a time when wider cost increases are already causing major financial challenges for many households¹. Separately, the price cap for a typical direct debit customer rose by 78% between the winter of 2018-19 and the summer of 2022, from £1,105 to £1,971 per year¹. The report covers the period to May 2022 and does not set out what happens to bills after that date.

What happens next

The NAO says Ofgem has recognised that it must quickly improve its capacity to oversee the financial resilience of individual suppliers and the sector as a whole¹. It says Ofgem and the Department must ensure the supplier market recovers from a state where high wholesale prices combined with the price cap have stifled some aspects of competition, and where ongoing volatility means many suppliers still face financial risks¹. The report states that this recovery needs to facilitate a longer-term transition of the supplier market to one that works for consumers and supports net zero, requiring regulation that balances competition, innovation, resilience and affordability¹. No timetable for these changes is given in the report¹.