Energy > Guides

What should I do if my energy supplier goes bust?

Fred Isaac

Fred Isaac
Nov 28, 2016


The explosion of smaller suppliers onto the UK energy market has boosted competition and driven gas and electricity prices down for households.

But threatened with a sudden and rapid increase in the cost of wholesale gas and electricity (up 35% and 40% respectively since January), many of these upstart challengers face going pop.

GB Energy, which had 160,000 registered customers, went bust on the weekend, becoming the first domestic supplier to go out of business in ten years.

It’s thought around twenty smaller suppliers are in danger, with industry experts fearing a domino effect of insolvencies.

If you’re with one of the smaller suppliers, you might worry you could be next.

Energy, after all, is pretty important and it’s only natural for customers to be anxious.

You might worry: will my power be cut off? What happens to the credit my supplier owed me? And will I end up paying too much for energy?

But don’t worry, industry regulator Ofgem has a safety net in place to protect you.

Rule number one is don’t panic, your supply will NOT be cut off.

Here’s everything else you need to know.

 

Should I cancel my Direct Debit?

We spoke to Ofgem and it told us that customers should not cancel their Direct Debits.

Ofgem’s advice to customers whose supplier has gone out of business was to sit tight.

If you're in credit, you won't have any further direct debits taken, and if you're in debt direct debit payments will be taken as normal. 

 

Will my supply be cut off?

Relax, you won’t notice any change. Ofgem will move you to a new tariff with a new supplier and your power won’t be cut off or disrupted.

We recommend taking a meter reading to make sure your transfer goes smoothly.

 

Who chooses my new supplier?

Industry regulator Ofgem.

You can switch without paying an exit fee immediately after your new contract is sorted.

 

Will my bills go up?

Ofgem say it’s ‘likely’ your bills will jump. We’d say it’s very likely indeed.

The regulator will move you on to a deemed contract – one you haven’t chosen – which will probably cost more than Phillip Green’s annual hair gel bill.

Deemed contracts are more expensive because your new supplier takes on more risk by accepting you as a customer, without performing the usual credit checks. To offset this risk they charge higher prices. 

But this doesn't mean you should shop around before Ofgem has sorted a new contract for you first. 

It’s best to let Ofgem handle the initial switch and to wait until you’ve heard from your new supplier. Switching prematurely could mean you struggle to get any credit you’re owed.

Your new provider will be able to tell what to do about any credit balances you had with your old provider (more on this later).  

You’re then free to switch without paying a penalty, or ask your new provider to move them on to its cheapest plan.

Compare energy prices on A Spokesman Said to make sure you're getting the best deal. 

Your gas supply will not cut out if your supplier goes out of buisness

 

I switched recently and was in credit, what happens to my money?

Don’t worry, Ofgem has set up a lifeboat to safeguard your money .

If you recently switched from a supplier that went out of business, and are owed money, your new supplier will honour the sum.

 

I’m in credit to my supplier. Will I get this money back?

Yes.

Again, your new supplier will sort this out. It will contact you to explain how this works; for example, you might get the money automatically credited to your account.

 

I owed money to my old supplier, who do I pay off the debt to?

You don’t need to pay any debt to your new provider.  

There’s a chance, however, that you may need to carry on paying it to your old supplier.

This is why it’s advisable not to tamper with your Direct Debit until Ofgem has managed the initial transfer.

 

Why smaller energy suppliers might struggle to survive

The UK currently has an astonishing 41 suppliers doing battle in the energy market.

By going online-only, smaller suppliers cut out the cost of complex billing systems and software and were able to pass on savings to consumers in the form of cheap energy. 

But these companies are essentially middle-men.

They buy power daily – usually from the Big Six – and then sell it on.

Great when prices are low and stable; but, because they don’t have the cash to secure bulk deals in advance, when prices go up their whole business model comes under threat.

Companies that operate in this way may face financial stress as wholesale prices continue to rise.

If you’re with a smaller supplier, and are concerned, you might want to consider switching to a fixed-rate deal with one of the Big Six.

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