British energy customers are facing a potential bill of £172 million from the collapse of 11 suppliers since January 2018. On top of this, thousands of people who owed money to failed suppliers lost out on consumer protections and faced aggressive debt collection as a result, according to new research by Citizens Advice.
Energy suppliers pay a number of industry bills, these cover things including renewable generation, infrastructure costs and metering costs. The charity’s research shows that £172 million in unpaid industry bills was left behind by failed suppliers, which will likely be paid by consumers through their bills.
Citizens Advice also estimates that at least 32,000 have been left open to potentially aggressive debt collection practices by the administrators who took over these companies. When energy suppliers fail, Ofgem’s Supplier of Last Resort (SoLR) process appoints a new supplier for customers to ensure a continued energy supply, while the old supplier is taken over by administrators.
Administrators are not bound by the same rules as suppliers licensed by Ofgem. This means they can pursue debts much more aggressively than usually allowed and customers can see the amounts they are being chased for go up overnight.
This leads to people, including those in vulnerable circumstances, being contacted by debt collectors and asked for sums they can’t afford at very short notice.
This can cause serious stress and anxiety for those caught in this situation. Since January 2018, Citizens Advice has helped over a thousand people with debt issues related to failed suppliers, with average debts of £250.
The charity is calling on the government to use the forthcoming Energy White Paper to fix the protection gap for customers who owe money to energy suppliers when they collapse. It wants the government to take action to make sure administrators of all energy companies have a duty to consider consumer interests and follow the same rules as suppliers.
It is also calling for legislation to ensure more regular payment of industry costs – in particular the Renewables Obligation (RO) – by suppliers, to stop the build up of big debts that are then paid by consumers.
Gillian Guy, Chief Executive of Citizens Advice, said “Consumers shouldn’t have to foot the multi-million pound bill left behind when companies collapse – and they certainly shouldn’t lose their usual protections in the process. The Energy White Paper is the perfect opportunity for the government to close the gap in protections and limit the cost to consumers of any future supplier failures. It must act now.”
In response to the report Philipp Pickford, Ofgem’s Drector for future retail markets at Ofgem, said “Competition in the energy market has helped to drive down prices for consumers. Ofgem introduced new tests this summer for companies applying for a licence to supply energy, to help drive up standards, ensure they meet their industry obligations and reduce the risk – and cost – of supplier failure. Ofgem will also consult in the autumn on tougher rules for existing suppliers.”
“Under Ofgem’s safety net, if a supplier fails the energy supply and credit balances of its customers are protected. We agree with Citizens Advice that this process has generally worked well and we are looking at ways of improving the experience of these customers when they are transferred to new suppliers and to reduce costs associated with supplier failure.”
Peter Earl, Head of Energy at comparethemarket.com, said: “The cost of an energy company collapsing should never end up hitting the wallets of consumers. Protecting customers should be a priority for the energy industry but recent steps taken by the regulator – which were meant to protect customers – appears to have done the opposite. For people already worried by their energy company collapsing, the news that they might also have to pay a share of the costs of the failure, will be hard to swallow. Ofgem plans to introduce stress tests for energy companies entering the market, which should hopefully lead to fewer supplier collapses in the future, and create a more efficient and resilient industry that benefits from increased competition.”