What to Do When Your Energy Supplier Collapses

04 Dec 2018

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If your energy supplier collapses, first try not to panic. The energy regulator Ofgem protects all customers, no matter who supplies your energy, from scenarios exactly like this – your energy supply won’t be interrupted, and your credit balance protected. Ofgem’s site is a good resource any time you need more information or the latest news about energy suppliers.

Ofgem advises not rushing to switch straight away as it can complicate its job; meanwhile your old supplier may not be able to process all the switching requests. Another good tip is visiting your supplier’s website, which will usually post a notice from Ofgem with all the information available to date and any useful contact details, in case you have more questions.

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What happened to Spark Energy?

Spark Energy, an energy company with 300,000 customers, announced on November 23rd that it will cease operations following the collapse. This is the seventh and, to date, largest firm to fold this year as challenger firms have been unable to compete in the tough market of energy supply.

Spark Energy customers shouldn’t worry or hurry to switch to another supplier just yet as they are protected under Ofgem, the energy regulator’s, safety net, meaning energy supply will remain uninterrupted.

Below we take a look at why this keeps happening and what customers should consider when picking an energy supplier.

What does this mean for customers?

Ofgem insists that customers have nothing to worry about at the moment. What this means in real terms is that energy will continue to be supplied as normal without a break in service, you may not even notice that Spark is no longer the company supplying your energy. Further, outstanding credit balances will also be protected.

The only thing to currently do is make a note of meter readings and Hoppy recommends taking a picture of the meter to help you remember the exact date and reduce any potential disputes, in case they arise.

Ofgem has announced that OVO will be the new supplier for Spark Energy customers; once this goes into full effect all customers will be contacted with the next steps to take. It’s important to not panic or race to switch to a new supplier until these details have been settled to ensure that the process of transferring customers and settling any outstanding balances is as smooth as possible for everyone affected. 

Once customers are notified of their new supplier, it will signal the end of whatever contract they are currently on, whether that’s fixed tariff or variable. Customers will automatically get placed on a ‘deemed’ tariff which can often be more expensive, though, in the past, suppliers have honoured existing customer tariffs when taking over the ceased supplier’s contracts.

Information from Ofgem

Once you are contacted by a new supplier, take the time to carefully evaluate what you’re being offered, comparing prices against your old contract. If you’re unsure that the new deal offered to you is the best one on the market, then use Hoppy’s easy comparison tool to search for the cheapest tariff. Don’t worry about exit fees – you won’t be charged if you decide to go with a different supplier. You can also call your new supplier and request to be put on the cheapest tariff available.

Mary Starks, Ofgem’s Executive Director for Consumers and Markets, reassures with the following: “Ofgem will now choose a new supplier and ensure you get the best deal possible. Whilst we’re doing this our advice is to ‘sit tight’ and don’t switch. You can rely on your energy supply as normal. We will update you when we have chosen a new supplier, who will then get in touch about your new tariff.”

What does the future for challenger firms look like?

Spark Energy’s collapse wasn’t the only news of a challenger firm going bust last week. Extra Energy, a supplier with 130,000 customers, folded just two days prior, raising numerous questions around the future of challenger firms.

Currently, challenger firms supply around a fifth of all UK households, with many consumers looking for cheaper and greener deals, whilst the rest rely on services provided by the ‘Big Six’.

Rising wholesale costs have put many small and medium suppliers under a lot of pressure, even forcing some into debt. Ofgem is owed £58.6 million in unpaid renewable energy subsidies after many firms missed October’s repayment deadline; Spark Energy was responsible for a significant chunk of that figure.

The CEO of Spark, following the company’s collapse, said: “There is little doubt that these are difficult times in the industry. You only have to open the newspapers to see coverage of how the price cap and wholesale costs are impacting suppliers, big and small, across the country.”

Smaller firms can’t keep up with rising wholesale costs in the same way as larger suppliers, making them extremely vulnerable to changes in price and without much power to compete in the increasingly tough and unstable marketplace.

Predictions are coming in that even more small and medium firms are to follow in the footsteps of Spark Energy, since wholesale prices continue to rise and uncertainty over Brexit looms. Whatever happens, customers should feel secure as Ofgem’s safety net is always in place to ensure that energy supply remains uninterrupted.

Ofgem also plans to introduce tougher tests for suppliers looking to enter the market. Applicants will have to prove that they have appropriate funds and resources to manage their business for at least 12 months before they can receive a license to operate. The measures are set to be in place by Spring 2019.

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