UK's largest energy suppliers 'will withstand market turbulence'

Efficient hedging and good access to capital should ensure Centrica, EDF Energy, E.ON UK and Scottish Power Ltd. ride out the UK's energy supplier crisis, S&P Global Ratings said Sept. 30.

Three more small suppliers ceased trading Sept. 29, bringing total supplier failures this year to 12.

"We expect further consolidation in the number of operators -- particularly for smaller players -- as the UK heads into the winter months with energy prices remaining high," the ratings agency said.

All four of the above-named larger suppliers rated by S&P Global Ratings, however, "have prudent hedging policies in place to manage commodity price risks," it said.

The likelihood of state intervention would increase, meanwhile, if remaining operators hit liquidity and administrative constraints in their ability to absorb large customer books.

"The October price cap reset and the imposition of an industry levy to absorb the burden of failed suppliers will challenge household energy affordability, particularly as supportive government measures, such as furlough, end," it said.

Supplier failures with years has meant large and midsize players have taken on almost 2 million accounts under regulator Ofgem's supplier of last resort mechanism.

Many of these customers are on the price-capped default tariff and are loss-making for suppliers, despite a 12% hike this winter in the tariff rate.

Gas prices have increased by nearly 180% since the beginning of the year, including a 55% rise since August.

At the same time, spot prices for electricity have averaged about GBP80/MWh this year versus a 2018-2020 average of GBP40-45/MWh.

S&P Global Platts assessed the price of front-month UK NBP gas at 214 pence/therm Sept. 29, a doubling in price since Aug. 23.