In deregulated utility markets, a business supplier’s main role in the energy market is to procure gas, electricity, or water at wholesale rates and subsequently deliver these utilities to their customers through established contracts.
However, in scenarios where a customer declares bankruptcy or fails to pay their bills, the supplier remains responsible for settling the wholesale charges incurred by their customer’s consumption of electricity, gas, or water. This situation can lead to substantial financial losses for suppliers.
The COVID-19 pandemic and the have intensified the significance of credit risk for suppliers, especially due to the heightened rate of business closures during this period.
What else do energy suppliers consider?
Energy providers routinely assess a business’s Standard Industrial Classification (SIC), which serves as a categorization system for various types of businesses.
Certain sectors, such as pubs and restaurants, carry a greater level of risk compared to others. This heightened risk is attributed to the frequent turnover of management within these industries.