Thousands of customers stung by price hikes as energy firms go bust – report
More than 250,000 customers have been moved on to expensive energy deals after their suppliers went bust, new research has revealed.
The consumer charity Which? said that 283,000 of the 925,000 energy customers whose supplier failed in the past 18 months were shifted onto standard variable tariffs (SVT), with some being stung with overnight hikes of hundreds of pounds.
It said that SVTs are often the most expensive deals available on the market and warned that the current system was “failing consumers”.
The charity said customers were left “facing a lottery” of not knowing whether regulator Ofgem will move them on to one of the cheapest or most expensive deals on the market if their supplier goes bust.
Its research, published on Monday, also found that some customers had reported being threatened with bailiffs over debts to a failed supplier.
Which? is calling on Ofgem to “get a grip on this chaos” by ensuring new tests for suppliers due to start on Friday are “sufficiently stringent that they prevent so many weak and unfit firms from entering the market if they can not sustain prices and customer service levels”.
Which?’s head of home products and services Natalie Hitchins said switching supplier was still the best way to get a good deal and better service.
She added: “It’s wrong that energy customers face a lottery when their supplier goes bust – and that those who have followed advice to do their research and shop around for a better deal can be hit with such substantial price hikes.
“Ofgem must ensure its new checks are sufficiently robust to bring an end to this cycle of supplier failures, and alongside the Government should explore ways to lessen the financial burden and make the process easier for consumers when energy firms collapse.”
Which? said that Ofgem, and the Government in its forthcoming energy White Paper, should explore ways to reduce the financial burden and improve the overall experience for consumers when energy suppliers go bust.
But an Ofgem spokeswoman said around half of the customers from failed suppliers in the last 18 months had been transferred by their new supplier on to tariffs cheaper than their standard variable rate.
She added: “If a supplier fails, under our safety net we find a competitive deal for customers when appointing a new supplier.
“Appointed suppliers have to send welcome packs to customers with details of the new tariff they will be put on.
“Customers can ask to be moved onto a different tariff or shop around and switch to save money. No customers are charged exit fees if they decide to switch to another supplier.”
Which? said that 10 gas and electricity firms had stopped trading since the beginning of 2018.
It said that three of the suppliers of last resort, appointed by Ofgem to take over the customers of a failed supplier, put customers straight onto a SVT – Brilliant Energy and Northumbria Energy, Economy Energy, and Our Power.
The charity said that firms acting as a supplier of last resort play an important role in keeping gas and electricity supplies running, but they may have to find ways to cover the extra costs they face as a result of taking on extra customers.
Which? said Brilliant Energy and Northumbria Energy’s 17,000 customers were moved onto SSE’s standard variable tariff at £1,253 a year, which was £1 less than the maximum permitted by the price cap.
SSE told Which? these customers faced price increases of 38% on average.
A total of 235,000 Economy Energy customers were moved onto standard variable tariffs with Ovo Energy, Which? said.
The charity said some of these customers would have been put onto the Ovo simpler SVT which was at the level of the price cap at £1,137 a year, moving to £5 below the new price cap level at £1,249 a year in April.
Others with prepayment meters would have moved to Boost’s tariff in January at £1,134 a year, it added.
Which? found that after Our Power collapsed, 31,000 prepayment customers went onto Utilita’s smart energy variable deal, where appropriate, at £1,240 – £2 a year less than the prepayment meter price cap.
But the consumer champion said that not all suppliers of last resort put customers onto standard variable tariffs, with some – including Octopus Energy – moving customers onto their cheapest tariffs.