Ofgem crackdown on energy firm collapses
Ofgem is implementing measures to help prevent energy suppliers going bust. The energy regulator has put in place plans to demand independent audits of all suppliers, to make sure they’re financially robust and can meet minimum standards of customer service.
Ofgem will also be able to stop fast-growing firms taking on more customers unless they can prove they have the necessary funds and capacity to accommodate them.
But the measures don’t go as far as combating the problem of loss-leading tariffs. This is when suppliers offer rates offer tariffs well below market rates, knowing they’ll lose money on them - a tactic employed by a number of new suppliers to tempt customers away from more established suppliers. The regulator has said it has no plans to address this issue as it doesn’t want to interfere in pricing strategies any more than it already does with the price cap.
Mary Starks, executive director of consumers and markets at Ofgem, said: “The new proposals will create more accountability in the market, require more responsible and appropriate behaviour from suppliers in the market and reduce the risk and costs to consumers associated with supplier failure.
“In the event a supplier fails, the changes will also strengthen the ‘safety net’ and improve the experience of customers when they are transferred, so that consumers can be reassured that whatever happens they will be properly protected.”
The consultation ends on 3 December, with an announcement on implementation of the new rules expected in 2020.
Toto goes bust
The news of Ofgem’s new measures couldn’t have been more timely, as the latest small supplier to go bust - Toto - offers the perfect example of everything that is wrong with the energy market.
The small supplier already had 143,000 households on its books, when it bought a further 43,000 customers following the collapse of Solarplicity in July.
Solarplicity went bust amid a storm of customer complaints, and those same customers saw little or no improvement when their contracts were moved to Toto, which itself has been on the receiving end of a staggering 730 complaints this year alone.
Furthermore, Toto owes £4 million in renewable energy obligations.
What to do if your energy supplier goes bust
If your energy supplier goes bust, the advice is to sit tight, take a meter reading and wait for Ofgem to appoint your SoLR. As soon as your new supplier contacts you, you should then run an energy price comparison to see if you can get a cheaper deal elsewhere - it’s unlikely your new provider will have placed you on a competitive deal, so you should switch energy supplier as soon as possible.
For more information, check out the video below, and have a read of What happens when your energy supplier goes bust?
Click here to run an energy price comparison, and see if you could be paying less for your gas and electricity.