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Energy Supplier Failures Leave £172m Bill for Consumers

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Consumers could end up paying the £172m bill to cover the collapse of 11 energy suppliers since the start of last year, according to Citizens Advice.

Energy suppliers in the UK are required to pay various industry bills in order to cover the costs of renewable energy generation, infrastructure and metering. However, research from Citizens Advice which analysed administrator reports for failed energy suppliers going back to January 2018, found that these suppliers left £172 million in unpaid energy bills. And the charity warned that these bills could be passed on to consumers.

Citizens Advice also warned about the ‘key protection gaps’ for customers that were in debt to a failed energy supplier. The UK energy regulator Ofgem is tasked with appointing a new supplier to take on a failed supplier’s customers while the collapsed firm is taken over by administrators. Any debt that a customer owes to a failed supplier is either bought by the new supplier or must be paid to the administrator. But administrators don’t follow the same rules as energy suppliers and can therefore be more aggressive in their debt collection methods.

Citizens Advice mentioned the case of an elderly customer who had agreed with their energy supplier to pay £10 a month towards paying off their debt. But when the administrators took over, the full £350 debt was requested at once, causing ‘distress’ to the customer. The charity claimed that since January 2018, it has helped more than 1,000 energy customers with debt problems, with the average person owing £250.

“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.”

Philippa Pickford, director for future retail markets at Ofgem, said: “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.”

Audrey Gallacher, director of policy at industry trade group Energy UK, said: “It’s a particular concern that, as Citizens Advice points out, administrators taking charge of failed companies are not required to treat indebted customers with the same consideration as suppliers. So we fully support their call for existing consumer protection requirements to be extended to administrators.

“The increase in competition and the number of suppliers in recent years have been great for customers in providing choice and driving down prices. But we welcome Ofgem bringing in tougher checks for suppliers entering and operating in the market to ensure they have sustainable business models and are adequately financed to serve their customers. Ofgem now needs to ensure that the ongoing operation of companies is monitored to minimise the risk of additional costs being loaded on to consumers.”

Fergus Cole
Fergus Cole

Fergus is a journalist specialising in the personal finance, energy and broadband sectors. He also has a passion for travel and adventure so tries to make the most of this in any spare time he gets.

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