Households face extra energy charge after suppliers go bust
Households could face an extra £4 charge on their energy bills after a series of supplier failures in the sector left customers and rivals to fill a black hole.
More than £97.5 million was missing from a green fund which energy companies pay to help renewable energy projects.
Regulator Ofgem, which oversees the fund, revealed that £57.6 million of the hole came from 16 suppliers that had gone bust and were unable to pay up.
Suppliers are meant to gather money from customers’ bills and pay it to Ofgem’s renewables obligation fund once a year.
However many struggling companies raid the cash earmarked for the fund in a bid to stay afloat. When they later go bankrupt the money is missing and other suppliers have to make up the shortfall.
Suppliers were told to pay up by September 1 or face interest on the money they owe. The final payment date was October 31.
Five still-active suppliers missed the final deadline, the regulator revealed. But three of those paid a total of £38.7 million in early November.
It leaves two suppliers, Breeze Energy and Gnergy, as the only active suppliers to owe money – £1.2 million – to the fund. Ofgem has previously threatened to withdraw their licences.
“If any supplier undermines the scheme by failing to comply by the late payment deadline, we will take strong enforcement action that could lead to them having their licence revoked,” Mary Starks, Ofgem’s executive director of consumers and markets, said in late October.
Most of the money gathered after the deadline was paid after Shell Energy stepped in to cover the bills of Hudson Energy after buying out the business supplier, whose £38 million bill was by far the largest late payment.
However the £38.7 million raised from Hudson, Nabuh and Planet 9, which came in after the final deadline, will not be taken into account when suppliers are charged for the hole.
It means that suppliers may have to fill the £97.5 million hole before getting the £38.7 million removed from the charge. They are expected to pass all costs on to customers.
Ofgem told the PA News Agency it was consulting on how to ensure that suppliers do not just pocket the £38.7 million while passing on the full £97.5 million cost to customers.
The regulator further revealed that 42 suppliers did not meet the September deadline but most of these paid up more than £109 million between the two deadlines. Twenty-one companies still owed money after October.
Citizens Advice said that failed suppliers have cost customers £255 million since 2018. This is an increase from its previous estimate of £172 million.
“The next government should legislate to compel suppliers to make industry payments – in particular the renewables obligation – more regularly. This would stop suppliers from building up such high levels of debt and stop consumers from being the ones to foot the bill,” said Citizens Advice chief executive Gillian Guy.