A Cornwall Insight study found that the cost of falling energy suppliers will add £ 34.36 to each family’s electricity bills for 2022-23.
Last year, 27 energy suppliers in the UK collapsed. In addition to this, Bulb was taken to the special administration.
This was because these suppliers found themselves between rising wholesale costs and limiting energy prices. In fact, this meant that energy suppliers supplied energy to their customers at a loss.
The SoLR mechanism adds money to accounts
When these providers stopped, their customers were assigned to other companies through the “Supplier of Last Instance” (SoLR) mechanism.
If vendors go through the SoLR mechanism, they can cover the cost of the process through a fee for the use of a distribution system (DUoS) that is applied to electricity bills.
However, because so many energy suppliers went through the SoLR process last year, this component of our electricity bills grew by an average of 33.9% in 2022-23. In some parts of the UK prices will rise even more, and in London and the South of England will rise by 40%.
Why do we need a SoLR mechanism?
Although the SoLR mechanism is obviously expensive, it is important to remember that it also provides great benefits to customers.
Last year, millions of us were left without a supplier when our supplier stopped. However, the SoLR mechanism ensured that energy supplies were not disrupted and a new supplier was appointed quickly (we reviewed what happens when your energy supplier shuts down here).
However, Laura Woolsey, a senior analyst at Cornwall Insight, highlighted the fact that the SoLR process “brought significant costs”.
She added: “If we want to protect both consumers and companies in the energy market, we need to see more than short-term fixes, we need long-term reform. This includes serious consideration of the future of the default tariff cap. currently works as a barrier to the success of smaller energy companies and does not secure the cost of electricity bills. Ultimately, if more suppliers fail, consumers will be left behind. “
Electricity bills continue to rise
Earlier this month Ofgem announced that the energy price cap increases to £ 1,971 in April. Although this price increase is mainly due to cost growth of wholesale costsincreasing DUoS fees also increases electricity bills.
However, despite the fact that the price limit is growing by a whopping 54%, it is still recommended to follow the price limit and not run the Internet energy comparison and change of supplier. That’s because the best energy offers from the UK the best energy suppliers still cannot exceed the price limit.