DOfgem have announced today that they are tightening the rules on suppliers starting up in the UK energy market.
This is after a raft of supplier collapses, eleven in the last year, impacting 800,000 homes and 2 million people; and some new suppliers having much publicised customer service meltdowns.
From now on new suppliers will need to provide details of (1) their funding arrangements and (2) their customer service plans before they can start supplying customers.
Mary Starks, executive director of consumers and markets at Ofgem, said:
“The new requirements will help us to weed out [suppliers] that are underprepared, under-resourced and unfit to hold a licence. This will help reduce the risk of supplier failure and help drive up standards for consumers.
What kind of problems have there been?
Eleven suppliers have gone bankrupt in the last 12 months landing 840,000 homes (roughly two million people) in limbo and leaving OFGEM, the regulator, with a bill of £100 million to clean up the mess (see bottom of the page for a list of the failed suppliers).
A bill incidentally that is then paid for by a small tax on everybody’s electricity bills costing about £4 per home.
OFGEM have found new suppliers for the customers and credits have been honoured but still it’s been an unsettling time for the industry.
Customer Service Problems
Some suppliers have been offering really good service.
New suppliers like So Energy, Igloo Energy and Green Network Energy are high up in both the Citizens Advice and energyhelpline rankings. These join big suppliers like EDF, British Gas and SSE who also score highly.
However some suppliers haven’t been providing good service. There have been a raft of huge fines for companies offering shocking service dished out by the regulator.
Customers have gone online to complain some claiming their suppliers have locked them in and are now preventing them from leaving, imprisoning them in a kind of energy supplier hell.
Complaints include bills never appearing, repeated price hikes – some people reporting four hikes in six months on small supplier variable deals, and direct debits being hiked dramatically (some customers report by 40%).
What Can Customers Do To Avoid Issues?
- Look at service ratings – only switch to a supplier with 3 stars and above. When you switch our advice is to look at the service ratings. On energyhelpline we are one of the few price comparison services to show service ratings. We believe every comparison service should show service ratings but few do any more. Below 3 stars you are taking a pretty big risk on service. 3 stars means typically OK service, 4 good and 5 excellent.
- Switch to a fixed price deal. This means your rates can’t be hiked mid contract. You can choose from many 1 and 2 year fixed price deals. There are also some longer ones typically up to 3.5 years. You can also find ones between 1 and 2 years in length eg. 18 month deals.
- Consider a big supplier. The big six suppliers don’t always get the best rep but they are stable and very unlikely to go bust. Who are they? In rough size order: British Gas, SSE, E.ON, EDF, npower, and ScottishPower. There are also medium sized suppliers that seem stable and have hundreds of thousands of customers eg. Shell Energy (formerly First Utility), Green Network Energy and Ovo Energy.
Following these rules a typical energy customer can save £250-£350 a year switching, and get good service, and a supplier that’s very unlikely to fail.
Supplier Bankruptcies over the Last Year (July 2018 – July 2019)
|Supplier||Date of |
|No. of Customers – |
time of collapse
|National Gas & |
|July 2018||80||Hudson Energy|
|Ephase Energy||July 2018||20||Not |
|Iresa Energy||July 2018||95,000||Octopus |
|GEN4U||September 2018||500||Octopus |
|Usio Energy||October 2018||7,000||First Utility (now Shell Energy)|
|Extra Energy||November 2018||129,000 (108,000 |
|Spark Energy||November 2018||290,000||Ovo Energy|
|OneSelect||December 2018||36,000||Together Energy|
|Economy Energy||January 2019||235,000||Ovo Energy|
|Our Power||January 2019||31,000||Utilita|
|Brilliant Energy |