Energy customers in the UK could face a potential bill of £172 million following the collapse of 11 suppliers since January last year.
That’s according to latest research from Citizens Advice, which reveals the amount in unpaid industry bills was left behind by the failed energy suppliers, covering renewable generation, infrastructure and metering costs.
It believes that will likely be paid by consumers through their energy bills.
The consumer body also alleges thousands of people who owed money to failed suppliers lost out on customer protections and faced “aggressive debt collection” by the administrators that took over these companies.
It estimates the number of people who owe money stands at least 32,000.
Ofgem appoints a new supplier for customers through its ‘Supplier of Last Resort’ (SoLR) process when a company goes bust, to ensure a continued supply of gas an electricity, while the old firm is taken over by administrators.
Citizens Advice says these administrators are not bound by the same rules as suppliers licensed by Ofgem, which could lead to them pursuing debts “more aggressively than usually allowed” and the amount customers are being chased for going up “overnight”.
This also leads to people, including those in vulnerable circumstances, being contacted by debt collectors and asked for money they can’t afford at very short notice, causing stress and anxiety.
The charity is calling on the government to use the forthcoming Energy White Paper to fix the protection gap for customers who owe money to energy suppliers when they collapse.
It is also urging the government to take action to ensure administrators of all energy suppliers “have a duty to consider consumer interests” and follow the same rules as suppliers, in addition to ensuring more regular payment of industry costs – in particular the Renewables Obligation – by suppliers to stop the build up of big consumer debts.
Gillian Guy, Chief Executive of Citizens Advice 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.
“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.”
Ofgem said competition in the energy market has helped drive down prices for consumers.
Philipp Pickford, Director for Future Retail Markets, added: “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.
“Under Ofgem’s safety net, if a supplier fails the energy supply and credit balances of its customers are protected. We agree with Citizens Advice that this process has generally worked well and we are looking at ways of improving the experience of these customers when they are transferred to new suppliers and to reduce costs associated with supplier failure.”
Energy UK agrees with the call to extend existing consumer protection requirements to administrators and believes while the safety net is essential, it is being triggered “far more than it was ever intended”.
Director of Policy Audrey Gallacher said: “This means customers potentially footing the bill for as much as £172 million as result of suppliers exiting the market because of unsustainable business models, often after performing badly with their customer service.
“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.”
Matthew Vickers, Chief Executive at the Energy Ombudsman, added: “It’s worrying that consumers, including those in vulnerable circumstances, are facing aggressive debt collection practices at the hands of administrators. Such cases fall outside our remit. From our perspective, we are concerned that the SoLR safety net doesn’t cover complaints that are escalated to us as the ombudsman.
“If a consumer complains to us about a supplier that subsequently ceases trading, there is no formal mechanism that enables the complaint to be resolved or the consumer to receive redress. We have raised this particular issue with Ofgem and our two organisations are working together in a positive and collaborative way in order to identify a solution that best serves the interests of consumers.”