Collapse of Bulb demonstrates failure of energy price cap, says IEA
Commenting on reports that Bulb Energy has fallen into special administration, Andy Mayer, Environment, Energy and Infrastructure Analyst at free market think tank the Institute of Economic Affairs, said:
“The collapse of Bulb, Britain’s seventh largest retail energy company, is a direct result of government policy, specifically the energy price cap.
“This is the twentieth British energy company to fail since global gas prices rose sharply this year, yet the government persist in this policy, while promoting a fiction of fairness and control through central planning that has real and damaging consequences. The result is a £400 per customer difference between wholesale and retail prices, multiple business failures, and temporary state ownership of an insolvent business.
“Bulb’s customers will be protected, through the Special Administrator Regime, but their creditors and investors will suffer, leading to a wider loss of confidence in energy concerns.
“Who would choose to invest in a market when the government has shown a willingness to let companies go to the wall rather than break political promises on prices they cannot keep? Prices are going to have to rise regardless, but the damage will already have been done. It is time to end the price cap.”
The firm’s 1.7 million customers will be continue to be supplied by the energy regulator Ofgem, after the firm agreed to be put into special measures during weekend talks.
Half of Britain’s energy suppliers have already gone bust this year, 14 of which collapsed throughout October and September.
Gas prices have soared by 250% since January.
The energy price cap currently limits how much firms can charge consumers, which means the costs of wholesale price surges mostly fall on the suppliers.
Experts forecast that the energy price cap will be permitted to rise by an additional £400 when it is next reviewed in February.