More than 280,000 energy customers switched to expensive deals after supplier went bust

More than a quarter of a million energy customers have been switched to expensive tariffs after their supplier went bust in the last eighteen months, according to research.

Some households bills have risen by hundreds of pounds overnight, consumer group Which? found.

After a string of suppliers ceased trading, 925,000 energy customers have been switched by the energy regulator Ofgem to other deals since the start of 2018. Of those, 283,000 were shifted to standard variable tariffs (SVTs), which are often the most expensive option available.

Firms acting as a so-called supplier of last resort play an important role, taking on customers from failed companies and keeping their gas and electricity supplies running. These suppliers may also have to find ways to cover the extra costs they incur as a result of taking on extra customers. But Which? said the current system fails consumers who are often left facing a “lottery” that could see them moved onto an expensive tariff.

Its report, published on Monday, cited the example of Brilliant Energy and Northumbria Energy’s 17,000 customers who were moved onto SSE’s standard variable tariff, which at £1,253 a year was £1 less than the maximum permitted by the government’s energy price cap. These customers faced price increases of 38 per cent on average.

A total of 235,000 Economy Energy customers were moved onto standard variable tariffs with Ovo Energy. Those customers also ended up paying just under the government-mandated maximum price.

After Our Power collapsed, 31,000 prepayment customers went onto Utilita’s Smart Energy variable deal, where appropriate, at £1,240 – £2 less per year than the prepayment meter price cap. 

However, some suppliers who take on customers in such circumstances, including Octopus Energy, move them onto their cheapest tariffs.  

Ten energy suppliers have gone bust since the start of 2018, with many of them struggling to make a profit after offering cheap deals to attract new customers. 

In April, energy regulator Ofgem promised to tighten up its rules for approving new suppliers to help improve standards for customers and reduce the risk of companies failing.

Applicants for a licence to supply energy will have to demonstrate that  they can fund their operations for the first year; how they expect to comply with regulatory obligations and how they expect to provide a satisfactory level of customer service.

The new tests are due to come in on 5 July and Which? is calling on Ofgem to “get a grip on the chaos” by ensuring strict implementation.

Natalie Hitchins, Which? head of home products and services, said: “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.

“For now, switching is still the best way to get a good deal and better service, so anyone unhappy with the service they are receiving or the price they are paying should check the results of our energy customer satisfaction survey and find a better-rated supplier. They could save around £300 a year.”


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