Picking up the pieces
Since January 2018 ten domestic suppliers have failed, affecting around a million consumers. The failures follow rapid growth in the market, from 12 suppliers in 2010, to 70 by 2018.
The companies blamed a range of factors for their failure, including rising wholesale prices and the price cap. But these companies also had consistently poor service, grew too quickly and were often pricing at unrealistic levels.
Our research shows there are key protection gaps for customers of failed suppliers in relation to debt, because the administrators of these companies don’t have to follow Ofgem rules on back billing and assessing ability to pay.
When suppliers fail they leave behind unpaid industry bills, and there can be a cost to protect their customers credit balances. These cost are likely to end up on consumers bills. Our analysis shows the total cost for recent failures could reach £172m.
The government and Ofgem need to act to protect all consumers and reduce the cost of failures by:
Ofgem introducing tougher rules for suppliers that make sure they are being run responsibly and offering appropriate levels of service. This should be backed by effective monitoring and enforcement.
Government legislating to ensure administrators of failed suppliers have to consider consumer interests and follow Ofgem rules.
Government legislating to require the Renewables Obligation to be collected more regularly, in order to minimise the risk of large unpaid bills.
Ofgem acting to ensure suppliers don’t build up excessive credit balances, and have processes in place to protect them if they fail.