From Hub to Bust: The Impact of Energy Administration on Businesses

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Due to the recent energy crisis in the UK, many energy suppliers have gone bankrupt and had to enter administration. This has significantly impacted businesses that are clients of these suppliers. Quite a few energy suppliers, or hubs, have gone bust, leaving their clients to turn to OFGEM for help.

Hub Energy is one of the energy suppliers that went bust and was placed under administration. E.ON, another energy supplier, has taken over their contracts. The clients of Hub Energy, including businesses, have suffered significant impacts because of this. Unfortunately, these impacts are primarily negative. When your energy supplier undergoes administration, your contract becomes void, and the energy rates you are accustomed to will change.

If you are unhappy with the new contracts offered, you can explore other options that might be better for your business.

Various businesses offer online utility price and rate comparisons, including Utility Bidder. Visit their website at http://utilitybidder.co.uk and find the deals that work for you and your business.

Current Energy Crisis

As economies began to recover after the global Covid pandemic, countries across the northern hemisphere have been forced to scrounge for supplies. The long and cold winters they experienced in 2020 and 2021 all but depleted gas storage levels. This increased gas prices in the UK by more than four times. As one of the world’s leading economic countries, China’s demand for gas rose drastically. China’s gas imports via tankers surged by almost a fifth to meet this high demand. They left fewer gas shipments to go to Europe from supplying countries like Qatar.

The flow of pipeline gas to Europe from Russia must meet the demands. When Russia refused to increase gas exports to Europe, gas prices rose by another 10%. Russia has yet to make an effort to meet the gas demand from Europe. The Nord Stream 2 pipeline, a central gas line that would double the capacity to send gas to Germany via the Baltic Sea, is still in the planning phase. But progress has been halted by US sanctions due to concerns that it would increase the EU’s reliance on energy imports from Russia. Even though the UK only receives about 4% of its gas from Russia, the war has hindered the supply between Russia and Ukraine.

Regarding electricity, almost half of the UK’s supply comes from fossil fuel and gas-fired power plants. With the rising energy needs, these power plants have been implemented more. Britain had to temporarily fire up coal power stations, paying millions of pounds to make up for some of the power shortage. Due to the age of nuclear power plants, more maintenance has had to be done to keep them running, resulting in unplanned outages. There is also the issue of most of the UK’s nuclear power plants scheduled to be closed by the end of the decade, with just one new one being built to replace them. Then a fire shut down a main power cable used to import electricity from France. The UK’s wind turbines have also slowed down during some of the windiest months since 1961.

The UK also has some of the lowest gas storage capabilities in Europe, leaving the market entirely exposed to the supply shortage. The UK holds less than 1% of Europe’s stored gas. The country might not run out of energy supplies, but the rates will become astronomically high.

Energy Administration

Due to the energy crisis, some smaller energy suppliers cannot keep up with the energy cap and are forced to declare insolvency. The administration is a formal insolvency procedure where a company is placed under the control of an insolvency practitioner or an administrator. When your energy supplier is under administration, OFGEM will tell you what to do. If your energy supplier has gone bust, there are a few things that you have to do. If an administrator takes over your supplier, rest assured that no action is required on your part. Your energy supply will remain uninterrupted, as your supplier will contact you directly to communicate any updates or changes.

  • They will contact you to let you know what is happening.
  • Don’t cancel your debit order, as you’ll continue to receive energy and be billed for it.
  • You can look for a different energy supplier that better fits your business needs.
  • There may be a time when the administrator closes down your supplier and moves you to another one. You will be informed about this and what to do in advance.

Impact of Energy Administration on Businesses

There are various impacts that the energy crisis can have on your business.

Higher energy bills

Because of the increasing energy demand, prices will increase as well. Your business’ energy bill will increase. Your budget will be strained, and you might be forced to make cutbacks in other areas. Your company might even have to close its doors.

Difficulty recruiting staff

People looking for jobs will be expecting higher wages than a business can afford to pay. Higher energy bills could make it hard to expand your business or hire new staff. The increase in business costs will have to contend with increased living costs. Due to job security, other people may not want to leave their current positions.

Possible power cuts

The increase in energy demand will cause power plants to struggle to keep up, and less electricity will be available. This could lead to widespread power cuts, which will disrupt businesses. This will cost companies a lot of money every year.

Impact on the supply chain

Increasing energy costs will increase prices all over the economy. Increased transportation costs will impact the delivery of goods. This will disrupt businesses and could even lead to losing customers.

Difficulty accessing finance

Due to the increased cost of running a business, banks and other financial institutions are becoming more reluctant to lend money to businesses. This stunts business growth and survival.

Conclusion

Due to the current energy crisis in the UK, many energy suppliers are going bankrupt and being taken under administration. Energy administration is leading to businesses having increased energy bills, difficulty recruiting staff, power cuts, supply chain interruptions, and difficulty finding financial assistance. These are but a few impacts that energy administration has on businesses.