Bill for Failed Energy Suppliers Rises as Ovo Claims £13 Million for Rescuing Customers of Spark Energy

Consumers will face even further costs from a string of failures of energy suppliers, as Ofgem is “minded” to allow Ovo to recoup £13 million for taking on the customers of Spark Energy.

Spark Energy went bust in November 2018, stranding 290,000 customers. Ofgem had opened an investigation into the Selkirk-based firm’s failure to pay £14 million into the Renewables Obligation (RO) fund and ultimately revoked the company’s supply licence.

Challenger energy supplier Ovo was appointed the Supplier of Last Resort (SoLR) for Spark’s customers several days later. 

The addition of Spark’s 290,000 customers took Ovo Energy to more than one million accounts, making it the leading challenger to the Big Six. It’s a position Ovo has consolidated this year. A £500 million purchase of SSE’s retail arm, approved by the Competitions and Markets Authority last week, will make the Bristol-based company the UK’s second largest energy supplier, after British Gas.

Suppliers acting as SoLRs are entitled to make claims for additional costs they incur in taking over accounts. At the time of its application, Ovo didn’t waive its right to claim a Last Resort Supply Payment (LRSP) and has now filed to claim some of the costs of honouring Spark Energy customer’s credit balances.

Spark Energy collapsed owing its customers nearly £21.9 million in credit balances, an average of £75 per customer. Ovo has self-funded 40% of this credit balance liability but is claiming £13,080,509 to cover the rest. 

If Ofgem approves the request, as it seems likely, these funds will be recovered from distribution network companies, with costs ultimately spread across the entire market and passed onto consumers in the form of higher bills. 

The £14 million Spark Energy owned in Renewables Obligation (RO) payments was also ‘mutualised’ across all energy companies and passed onto customers with higher bills. That takes the tab for Spark’s collapse to at least £27 million.

Last week Ofgem said it would also likely approve a request from Shell Energy (formerly First Direct) to claim £354,000 to honour the credit balances of customers abandoned by small supplier Usio Energy.

Citizens Advice recently revealed that the failure of 16 small energy suppliers since the beginning of 2018, including Spark and Usio, has left consumers facing costs of more than £255 million. With around 28 million electricity consumers in the UK, that means a bill increase of nearly £10 per household.