Distributor passes on £280m in higher energy prices to cover market carnage
The UK’s biggest electricity distributor has passed on hundreds of millions of pounds in higher prices to energy users to cover the cost of a wave of failed energy suppliers during the industry crisis.
UK Power Networks, which controlled by the Hong Kong billionaire Sir Li Ka-shing, revealed it had received claims totalling £280m amount from suppliers taking on customers.
This follows nearly 30 energy firms collapsing over the past year amid soaring gas prices, insufficient hedging and the constraints of the price cap.
Energy suppliers that ensure continued supply after a firm collapses can claim back costs from the distribution network operators (DNOs).
This includes UK Power Networks, which operate the power lines and cables that connect homes to electricity, which was given the greenlight by Ofgem to pass most of the £280m in claims onto customers through an increase in tariffs.
These came into effect in April.
This is part of the supplier of last resort process, which has estimated to cost consumers up to £2.7bn in clean-up bills.
Currently, UK Power Networks delivers power to 8.3m homes and businesses across London, the east and the southeast of England.
The hike in tariffs is revealed in the company’s annual accounts for the year to March 2022, which also show that it generated £1.8bn in turnover and £531m in pre-tax profits.
It also paid a £217m dividend to its owner.
There are six DNOs across the country, which were formed during the privatisation of the industry under Margaret Thatcher in the 1980s.
An Ofgem spokesperson said: “Our top priority is to protect consumers, and as these costs show, when a supplier goes bust, this cost is spread across all domestic consumers. That is why we are making sure suppliers entering the market have robust business plans to reduce the risk of failure. We are currently reviewing how the costs of supplier failure should be recovered.”
The story was first reported in The Sunday Times.