Over quarter of a million energy customers have found themselves on expensive tariffs after their energy company went out of business, according to a new study from consumer group Which?
The study showed that during the last 18 months 925,000 customers had been moved to a different supplier when their current one went bust, and 283,000 were moved onto the more expensive standard variable tariffs (SVTs). If an energy company goes under then its customers are moved to a new supplier appointed by the energy regulator Ofgem. However, the recent study shows that a large proportion of those switched in this way were not put onto the best deal available.
When Northumbria Energy and Brilliant Energy went out of business, they were moved to ‘big six’ provider SSE. Those customers were then placed on standard variable tariffs, which cost an average of £1,253 a year, conveniently £1 shy of the government-imposed price cap. When Ourpower went under, 31,000 customers using a prepayment meter were transferred over to Utilita’s smart energy variable deal at an average annual cost of £1,240, which is £2 under the allowed limit for customers who are using a prepayment meter.
Which? have argued that the current automatic switching system is failing customers, with people being switched over “facing a lottery” over whether Ofgem will find them a good deal or not. The research also showed that many customers who had been stung with higher prices were being threatened with baliffs when the were unable to pay the increased rates.
A spokeswoman for Ofgem however stressed that they do the best to find customers the best deal and that they are not obliged to stay with their new provider. “If a supplier fails, under our safety net we find a competitive deal for customers when appointing a new supplier.”
Customers who have been moved onto an expensive tariff this way will be able to switch to a new energy supplier without paying exit fees.