11 domestic energy firms have failed since January 2018, and consumers are “picking up the pieces,” according to a report from Citizens Advice.
These failed suppliers left behind £172 million in unpaid industry bills, costs levied on suppliers for infrastructure and metering costs and to support renewable initiatives. Those outstanding costs are likely to be shouldered by consumers, spread across all energy bills.
To limit the cost to consumers of failed energy companies, Citizens Advice is urging the government to require suppliers to make more regular payments of industry costs, especially the Renewables Obligation, to ensure they don’t leave behind huge debts.
Meanwhile, 32,000 customers of these failed suppliers have been left vulnerable to potentially aggressive debt collection practices by the administrators who bought the firms.
When energy companies fold, Ofgem’s Supplier of Last Resort process appoints a new supplier for customers, ensuring them a continuous energy supply. But their debt to their old supplier stands and is sold along with that company to administrators.
Administrators don’t have to abide by Ofgem rules on back billing and assessing ability to pay when pursuing customers for debts.
“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,” Citizens Advice warned.
Since January 2018, Citizens Advice has assisted more than one thousand customers of these failed suppliers, with average debts of £250.
The charity highlighted the case of an elderly customer who had arranged to pay £10 a month toward their debt to their energy supplier, following a decision by the Energy Ombudsman.
However, when the customer’s supplier failed, the administrator requested an immediate payment of the nearly £350 owed and threatened to bring in bailiffs.
Citizens Advice has called on the government to use the forthcoming Energy White Paper fix this “protection gap” for customers who owe money to failed energy suppliers. Administrators of these companies should have to follow the same rules as suppliers and have a duty to consider consumer interest, the consumer advocate has 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,” said Gillian Guy, Chief Executive of Citizens Advice.
“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,” she added.
Citizens Advice has previously called on the government to tighten its licencing procedures for energy suppliers, to prevent unprepared firms entering the market. The number of suppliers has exploded in recent years, from 12 in 2010 to 70 in 2018, but many of the new market entrants delivered poor customer service, grew too quickly, and priced at unrealistic levels. 11 have foundered since January 2018, stranding more than one million energy customers.
Starting this month, new energy suppliers are subject to stricter licencing rules, requiring them to demonstrate sufficient funding and a customer service plan. Ofgem will consult this summer on ongoing requirements for suppliers currently in the market.