Energy industry regulator Ofgem has told Express.co.uk billpayers do not need to worry about footing a more costly bill amid fears that more energy companies could go bust this winter. Chris O’Shea, head of British Gas-owner Centrica, warned this week that some of the larger UK energy providers and retail energy suppliers are likely to bust this winter, telling the Financial Times that some that are “struggling for cash” may already be trading while technically insolvent.
But Ofgem has reassured that the UK will likely not see a repeat of last year’s antics, where up to 29 energy firms collapsed as they struggled to cope with the surging costs of wholesale gas.
The regulator argues that its new package of reforms, unveiled last Friday, is designed to bolster consumer protection and will help to ensure energy suppliers are more resilient to market shocks. This could prove vital as Russian President Vladimir Putin, who has a tight grip on the integrated gas market, has threatened to “freeze” Europe in a move that may well send gas prices soaring higher.
As firms struggled to cope, going bust as a result, customers were automatically passed on to new suppliers. But this meant that many Britons lost out on special deals that were arranged under their old supplier and lost their credit balances (money taken from customers via direct debit that should have been in place when a supplier failed), in turn forcing them to fork out more for gas and electricity.
But an Ofgem spokesperson told Express.co.uk that there is no need to worry about the prospect of this happening again.
They told Express.co.uk: “Our proposals are about finding the most cost-effective way to protect credit balances that does not put more costs on already high bills.
“We think allowing suppliers to use some of their customer credit balances for innovation, operating cash and hedging but not for riskier spending liking funding unsustainable growth, is the right balance. Consumers will always have their credit balances returned to them should their supplier go bust.
“This is a similar model to banking where customer debit and savings account cash can be used by the bank for general lending but cannot be used for playing the riskier financial markets. We will closely monitor how suppliers use their customers’ credit and take action where needed.”
According to the regulator, you don’t need to do anything when your supplier goes bust. It assures that your supply won’t be disrupted and the whole process should only take it a few days. It adds that once it finds you a new supplier, the new supplier will contact you directly.
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But last year, large swathes of Britons were furious when they discovered they have had monthly direct debit payments taken from both their old supplier that went bust and their new supplier that took them on.
Nick Eastaugh tweeted: “I got caught up when peoples energy collapsed in September, I got told at the time not to cancel any direct debits, Brit Gas started taking £200 per month in Oct!, but still paying £120 per month to PE. Already stuck but now paying £320/month.”
Speaking on double payments last year, an Ofgem spokesperson said: “Once a direct debit has been set up with the new supplier, there should not be a need for direct debits to be charged by the old supplier or administrator.
“If customers have been charged twice via direct debit, they can cancel their direct debit with their old supplier. If they have concerns, they can contact their new supplier for advice. Ofgem’s safety net ensures that customers should always get their credit balance back.”
This also comes after a report by MPs on the Public Accounts Committee (PAC) argued that the industry regulator failed to govern the sector “at a considerable cost to billpayers” after the collapse of 29 energy firms forced millions of households to foot an eye-watering £2.7billion bill.
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They argued that this impacted up to four million customers across the UK, which could have been avoided if the regulator made requirements stricter for new suppliers until 2019, or for existing suppliers until 2021.
Costing an estimated £2.7billion for the four million consumers collectively, this amounts to around an extra £94 each placed on household bills to recover the cost of managing customers’ transfers to a new supplier. The watchdog also warned that this price is “very likely to increase”, blaming the extra charge on bills on “Ofgem’s failure to effectively regulate the energy supplier market”.
Dame Meg Hillier MP, chair of the committee, said: “It is true that global factors caused the unprecedented gas and electricity prices that have caused so many energy supplier failures over the last year, at such terrible cost to households. But the fact remains that we have regulators to set the framework to shore us up for the bad times.
“Problems in the energy supply market were apparent in 2018, years before the unprecedented spike in prices that sparked the current crisis, and Ofgem was too slow to act.
“Households will pay dear, with the cost of bailouts added to record and rising bills. The committee wants to see a plan, within six months, for how government and Ofgem will put customers’ interests at the heart of a reformed energy market, driving the transition to net zero.”