Shell claimed £200m from Ofgem heaping pressure onto household bills

Shell claimed almost £200m for costs associated with taking on customers whose suppliers had gone bankrupt in 2021, before generating record profits in 2022 on the back of soaring oil and gas prices.

Shell’s UK utility business claimed £197m under Ofgem rules for costs linked to picking up 500,000 new customers from five energy suppliers that collapsed due to soaring wholesale gas and electricity prices, The Telegraph first reported.  

Ofgem’s Supplier of Last Resort (SoLR) rules let utility companies reclaim the costs of taking on customers from collapsed suppliers, in a process that adds those costs to all UK household bills.

The the cost of compensating utility companies for picking up collapsed firms’ customers under Ofgem’s rules is set to hit £2.7bn, a recent report by the Public Accounts Committee (PAC) shows.  

A sharp uptick in demand for energy following the reopening of the global economy after Covid-19 caused global energy prices to soar in the latter half of 2021.

This saw a combined sum of 29 UK suppliers – including Bulb and Ampower – fall into insolvency from the middle of 2021 and to 2022, as energy suppliers faced widespread losses.

Shell’s utility business, Shell Energy, made a £97m loss on picking up the 500,000 extra customers from five of the collapsed suppliers.

However, the British supplier, which has 1.4m customers, could generate profits from those 500,000 customers in the future, when energy markets stabilise.

Shell later made record profits of £25bn in the first three quarters of 2022, in capitalizing on surging natural gas prices following Russia’s invasion of Ukraine.

The oil major first entered the UK supply market in 2018 after purchasing First Utility – one of Britain’s biggest energy suppliers.

Shell was approached by City A.M. for comment.