Ofgem has appointed Big Six energy Scottish Power to take over the supply of 108,000 domestic and 21,000 business customers of Extra Energy, an energy market minnow that went bust last week.
The assignment follows a supplier of last resort process that Ofgem called “highly competitive.”
Philippa Pickford, interim director for future retail markets of Ofgem, said: “We are pleased to secure a deal with Scottish Power, where Extra Energy’s domestic and business customers will be offered a competitive tariff for their energy. Their credit balances will be honoured and their energy supply will continue as normal.”
Extra Energy customers will be contacted by Scottish Power within the next few weeks and are advised not to switch provider until they are.
Extra Energy, which ceased trading last Wednesday, was launched in April 2014 and drew consumers, and media attention, with its bargain prices. At the time Extra Energy managing director Geoff Childs said the supplier was able to deliver savings to British consumers by “running a highly efficient and lean organisation” and using technologies its competitors didn’t have.
However, Extra Energy was dogged by reports of poor customer service. The supplier drew 1,682 complaints per 100,000 customers in the first three months of 2016, according to data gathered by consumer advocate Citizens Advice. At the time this was the highest complaints ratio posted by an energy supplier since Citizens Advice began compiling its league tables in 2011. This year, the record was surpassed when upstart supplier Iresa logged 9,000 complaints per 100,000 customers in three months. Iresa went bust over the summer.
At the time Extra Energy attributed its poor customer service performance to an influx of new customers, saying it had “failed to keep pace” as its consumer base expanded.
Extra joined Iresa to become the sixth smaller medium energy supplier to fall into administration this year. Future Energy, Gen4U, and Usio Energy have also folded since the start of the year. Meanwhile, news of Extra’s shuttering was followed closely by the announcement that Spark Energy, which supplied 290,000 customers, will also close doors, citing “increasingly tough trading conditions in the energy industry.” OVO Energy is reportedly in talks to buy Spark.
The string of failures of small energy suppliers comes despite falling market share from the Big Six. A quarter of British households are now using a competitor energy supplier, often notching huge savings, but they may be doing so at their own peril.
Poor customer service records and unstable finances from small suppliers have lead Ofgem to reevaluate its supplier licensing process. Under new strict rules announced last week and expected to come into effect in the spring, suppliers entering the market will have to demonstrate they have enough resources and funds to operate for at least 12 months. They’ll also have to present Ofgem with a plan of how they’ll meet customer service obligations, including detailing procedures for handling complaints and helping vulnerable customers.
Mary Starks, executive director for consumers and markets at Ofgem, said about the new licensing procedures: “New energy suppliers that have entered the market over the last few years have offered consumers more choice and helped to drive down energy prices and drive up customer service standards.
“However, complaints against some suppliers have been rising recently and we have had to step in when others have ceased trading.
“Our proposed new tests for suppliers wanting to enter the market will ensure consumers will be better protected against the risk of poor performance, while still allowing more competition and innovation in the energy market to benefit consumers.”