UK faces energy 'massacre'

UK energy market faces an absolute massacre that could force at least 20 suppliers into bankruptcy in the next month alone unless the government reviews the energy price cap, Scottish Power Chief Executive Keith Anderson said on Thursday.

Natural gas prices have spiked this year as economies reopened from COVID-19 lockdowns and high demand for liquefied natural gas in Asia pushed down supplies to Europe, sending shockwaves through industries reliant on cheap power.

“There is a significant risk you could see the market shrink all the way back to five to six companies,” Anderson told the Financial Times. Scottish power is owned by Iberdrola.

“We expect, probably in the next month, at least another 20 suppliers will end up going bankrupt,” Anderson told Sky. “We are now going to start seeing some relatively well-run, good, commercially sound businesses going bankrupt because they just can’t pass the cost of the product through to customers.”

The price cap, set by regulator Ofgem, limits the cost of energy for about 11 million people on suppliers’ default tariffs. It is reviewed twice a year.

Anderson said the regulator Ofgem and the government should look at changing the cap earlier than its next scheduled review in April so suppliers can pass on spikes in their costs sooner.

Without government and regulatory intervention, “we are in danger of just sleepwalking into an absolute massacre,” Anderson said.