Consumers Face Huge Cost of Collapsed Suppliers
Energy consumers in the UK are facing a £172 million bill caused by the collapse of eleven energy suppliers. Citizens Advice also fear 32,000 households may be targeted ‘aggressively’ by debt collectors due to unpaid bills.
The charity and advisory body said nearly thirty million households will be required to bail out the collapsed energy suppliers. They are urging the Government to ensure administrators of all energy suppliers follow the same rules as the suppliers themselves. The problem is that the administrators are not legally required to do so, as things stand.
Bust Suppliers Causing Distress and Anxiety
Citizens Advice explained how they have advised over a thousand ‘distressed and anxious’ consumers whose energy supplier went bust. The worry comes from the administrators not being bound by the same consumer protection laws as normal collection agencies.
The Government is thus being urged to increase legal protections offered to customers of energy suppliers who have gone bust. Ofgem has also called upon to place a limit on the cost of supplier failures in the future.
The CEO of Citizens Advice, Gillian Guy, insisted that consumers should not have to foot the multi-million pound bill. She added that consumers also shouldn’t lose their usual protections in the process when energy companies collapse.
Thousands at Risk of ‘Aggressive Debt Collection’
Citizens Advice have also warned that people who owed money to failed suppliers faced ‘aggressive debt collection’ by the administrators. The number of people at risk has been quoted as 32,000.
The estimate of the total bill has also been calculated by Citizens Advice. The total amount of £172 million is the deficit left behind by the failed energy suppliers. The amount comes from the likes of renewable generation, infrastructure and metering costs, and will be passed onto customers‘ bills.
Ofgem’s ‘Safety Net’ to Blame for Massive Bill
The massive multi-million pound bill has been allowed to increase by industry watchdog Ofgem. Their ‘safety net’ process moves customers of failed suppliers to another supplier before reclaiming the unpaid costs via energy bills.
The unexpected overuse of the safety net procedure was cited by industry trade group Energy UK as the culprit. They also identified Ofgem’s previous lowering of the minimum standards for new energy suppliers. This encouraged more competition for the Big Six suppliers, but too many new suppliers were not adequately equipped to survive.
Ofgem have since declared their intent to increase the licensing requirements of new suppliers. They plan to ‘stress test’ prospective suppliers to ensure they’re financially fit to survive the likes of wholesale price fluctuations.
Energy UK said, “The increase in competition and the number of suppliers in recent years have been great for customers in providing choice and driving down prices. But we welcome Ofgem bringing in tougher checks for suppliers entering and operating in the market to ensure they have sustainable business models and are adequately financed to serve their customers.”
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