Preston-based gas and electricity supplier, HUB Energy, has entered administration, with its 15,000 customers being transferred to EON Next.

A statement said that HUB Energy would continue to employ a number of its workforce of 29 employees during at least part of the administration, to “enable the smooth transfer of customers to EON Next and to assist with the final billing process.”

It was revealed the business was experiencing financial challenges, including cash flow problems, because it was unable to buy wholesale energy on usual market credit terms and prices had been soaring

Customers who have paid in advance to HUB Energy will have their balances protected under the ‘Supplier of Last Resort’ scheme.

Simon Renshaw, director with Company Debt, commented: “This is just another example of a small provider being unable to survive in the current market, which is faced with spiraling wholesale gas prices. As such, we’re seeing increasing use of the Supplier of Last Resort procedure.

“The smaller energy companies are often unable to compete because they do not have sufficient buying clout. While the government wishes to see a competitive market, the coming months are likely to see a contraction, with more consolidation and acquisition of the more attractive small players.”

HUB ENergy

Why are so many smaller energy companies failing?

Small energy companies are under pressure because the price of gas on wholesale markets is rising by as much as 80% and this is set to continue into next year.

This has created challenges for smaller providers who may not have been able to buy in enough supplies and could push more into insolvency as winter approaches. Energy suppliers must also meet a deadline of 31 August when they must pay funds collected from bills to pay renewable energy developers for clean electricity. If they fail to meet this date, they face penalty charges and risk being stripped of their supply licenses by regulator Ofgem.

According to data from analyst Cornwall Insight, some  1.7% of domestic energy customers have been rescued by the Supplier of Last Resort process in the last two years.

Between 2019 and 2020, 887,000 domestic customers were supplied by a company that left the market via the Supplier of Last Resort scheme.

Meanwhile, in 2021, a further 410,000 customers have been transferred to Supplier of Last Resort, – meaning more than a million households have been supplied gas and electricity by a firm that has failed

The Supplier of Last Resort procedure was set up by Ofgem in 2003 to ensure that when a provider fails,  other providers will ensure domestic customers are guaranteed a continued supply.