New research from Citizens Advice has shown that UK households are paying an extra £164 a year in bills due to failed energy companies.
In 2021, nearly 30 providers went out of business, with their customers needing to be allocated a new supplier by Ofgem’s ‘Supplier of Last Resort’ (SoLR) mechanism. This is coupled with the cost of bailing out Bulb, which due to its size, was deemed too large to fail and was subsequently placed into special administration by the government.
This form of quasi-nationalism means that UK customers are paying for the cost of running Bulb until a buyer can be found. So far, this has proved difficult given the volatile nature of the energy market. In total, failed energy suppliers have cost UK households £4.6bn.
Citizens Advice also spoke of some of the challenges that customers of defunct providers have faced such as inaccurate bills and aggressive debt collectors. As administrators are not bound by the same industry regulations set by Ofgem, they are not held to the same standards. Some customers also found themselves being billed for unpaid usage going back as far as a year.
All in all, the charity said that work was needed to restore public trust when it comes to the management of the energy market. It has called for a review of how insolvency laws come into play with SoLR and whether suppliers that went under were correctly managed.
“More than half a year since the energy market went into freefall, the bill for supplier failures is still mounting.” Said Dame Clare Moriarty, chief executive of Citizens Advice.
“On top of this, we’ve found that too often people are pushed from pillar to post when their supplier fails – adding to their stress and worry at an already difficult time.”
“An overhaul is needed before winter piles more pressure on suppliers and customers. The Government must improve the supplier failure process and ensure people who’re struggling aren’t chased for debts or left in limbo when they’re waiting for a refund.”
Ensuring that these issues are sorted will be of growing importance to many households. April’s price cap increase of 54% is set to be outstripped by the next adjustment in Autumn, which looks to bring average household energy bills to £3000. While the government has announced a range of support measures, finances look tight for many as the cost of the living crisis shows little sign of abetting.
