Ofgem takes action to protect consumers

11 February 2019

The energy regulator, Ofgem, has taken action to protect consumers as January saw two more UK suppliers fail.

On 4 January Ofgem announced that it was banning the company Economy Energy from taking on new customers until it resolved certain customer service issues, including addressing billing and payment failures, and issuing customer refunds in a timely manner. The action followed a wave of complaints. Ofgem gave Economy Energy three months to make the required improvements, after which they faced either an extension of the ban or steps being taken to revoke their supplier’s licence.

However, on 8 January it was announced that Economy Energy had ceased to trade.

Under Ofgem’s “safety net” arrangements, the energy supply of Economy Energy’s 235,000 customers was safeguarded while the regulator took action to find a new supplier for them.

The safety net was put in place to ensure that customers always have an energy supply and to protect their credit balances while they are assisted with moving over to a new supplier.

Making the announcement about the supplier failure, Philippa Pickford, Ofgem’s Director for Future Retail Markets, said:

“Our message to energy customers with Economy Energy is there is no need to worry, as under our safety net we will make sure your energy supplies are secure and your credit balance is protected.

“Ofgem will now choose a new supplier for you, 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.”

On 11 January Ofgem appointed OVO Energy to take on the customers.

A week later Ofgem announced that it was taking action to stop E (Gas and Electricity) Limited from completing a switch of former customers of Economy Energy. The regulator revealed that, according to its understanding of the situation, Economy Energy had agreed the sale of around 30,000 customers to E in December 2018. However, it had failed to notify Ofgem of this sale when it stopped trading.

On 25 January another supplier, Our Power with about 31,000 domestic customers, also ceased to trade. The regulator issued the same advice to Our Power customers as they had with the earlier case. Customers were advised to take meter readings and wait to be contacted by a new supplier arranged by Ofgem.

Our Power and Economy Energy join a list of nine small providers that have gone out of business in the past 12 months. Almost a million customers have been displaced.

The failures have led to calls for the system of licensing energy suppliers to be tightened up as fears grow that more providers might follow and add to the list still further. A lack of checks on entrance to the market, unfair cost exemptions and loss-leading tariffs have all been blamed for a situation where some smaller energy suppliers are unprepared to cope with changes in market conditions.

In June 2018 Ofgem announced a review of the licensing regime. The regulator published a consultation document in November which sets out proposals to strengthen the criteria used to assess supply licence applications. The consultation closed on 23 January.

Further information on the Ofgem safety net is available on its website.