Not panicing but...

Spark just went bust, plus some other smaller energy suppliers recently. You guys hanging in there okay?

Spark just went bust, plus some other smaller energy suppliers recently. You guys hanging in there okay?

Interesting question but what sort of answer would you expect Bulb to give?

We can all relax:

Apparently Bulb have paid their obligation for this year

So that’s one that isn’t going bust from a big bill just yet!

@Vasco is just expressing friendly concern - it would be interesting to hear from bulb what they think more generally about these developments in the sector. I like the simplicity of the deal and would have chosen bulb even if it wasn’t the cheapest because I hate this thing of being locked in for two years and then going to a higher tariff. Competition is so intense that I can imagine small suppliers with fixed-price deals being in real trouble, as wholesale prices have been so volatile.

Bulb have recently had 60 million quid from Yuri Milner.

I think out of all the emerging suppliers Bulb is probably the safest right now.

Paying 1 month in advance V paying usage after you have used will certainly help Bulbs cash-flow and reduce the odds of going bankrupt.

Thanks for your questions @Vasco and @francis_evans

Firstly, it’s never good to hear of another supplier failing.

It can be a worrying time for customers but it’s important to know that there are formal processes put in place should an energy company cease trading. As a customer, you should do two things:

  1. Take a meter reading
  2. Sit tight

That second point might seem odd, but it’s important that you don’t switch suppliers for now. Ofgem (the energy regulator) will oversee a bidding process so that all the customers of the failed supplier will be transferred over to a new supplier. Ofgem will make sure you get a fair deal. And you’re never without power.

Secondly, if you’re a Bulb member, you’re in safe hands.

Energy suppliers’ business models are complex but I’ll explain a bit about why a company might fail.

None of these reasons have affected Bulb or are likely to in the future.

Fixed tariffs

Understanding the markets and forecasting future costs of energy is key to setting the price of your energy bill. Hedging the costs of energy is tricky. If it’s not done accurately, it can cause cash flow problems.

A big chunk of your energy bill is based on the wholesale costs of energy. Most suppliers offer fixed rate energy tariffs that will not change even when wholesale costs go up or down.

This means that suppliers must forecast the long term costs of energy and set tariffs based on these predicted costs.

There is some risk in offering cheap fixed rate tariffs. If a company offers a low tariff but the cost of energy increases, they will make a loss on your energy bill. To recover some of these losses, some suppliers will charge higher rates for other customers.

In some cases, suppliers cannot recover the losses and these cash flow problems can cause a supplier to fail.

At Bulb, we do things a bit differently. Our tariff is variable. This means that it reflects the cost of the wholesale markets. Assessing the tariff prices every three months means we don’t run the risk of charging less than the cost of energy.

This year, rising costs of wholesale energy has affected suppliers across the industry. We had to increase the cost of our tariff. It’s not something we like doing. But, as our Pricing Principals state, when costs fall by more than £20 per year, so will your tariff.

Renewable Energy Obligations

Having sufficient a cash flow is important because energy suppliers are required to meet external costs.

For example, under the Renewable Energy Obligation, energy suppliers that offer renewable tariffs are required to pay renewable energy subsidies. If a supplier doesn’t hold the required number of renewable energy certificates to meet their obligation, they must pay into a buy-out fund.

If a supplier does not pay by the set deadline, they are fined by Ofgem. Such large fines can cause financial difficulties. Safe to say, Bulb met the deadline for ROCs.