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What does the crumbling of GB Energy Supply mean for its customers?

pulling plug on energy supply

At the weekend, GB Energy Supply collapsed. While the energy regulator, Ofgem, is transitioning its 160,000 customers onto a new supplier, we’re joined by guest author and GB Energy Supply customer, Liz Ford, who shares her take on the situation.

I’ve been a customer of GB Energy Supply since the summer.

Being two pensioners, we try to stay on top of our bills and make sure we make the most out of the best deals on offer.

I switched to GB Energy Supply after seeing that it was offering a reasonable tariff.

I took reviews of its service into consideration and knew a customer of the provider who was happy with it. All seemed fine, so I went ahead and locked into a fixed one-year tariff and set up quarterly bills.

Missing bill

Last week, I telephoned GB Energy Supply’s customer service team because I hadn’t received my latest bill.

I’d logged onto my account online, but while the meter reading was there, the bill wasn’t. Something wasn’t right – it should’ve been there at the beginning of the month.

After speaking to the customer service team, I was sent a bill via email and discovered I was £134 in credit.

Knowing that GB Energy Supply owed me money, I relaxed a bit, as I thought the bill would balance out.

Company collapse

Then on Saturday night, a friend (and former GB Energy Supply customer) rang me to tell me about the company collapsing.

I checked my emails to see if I’d had any contact from GB Energy Supply and saw one telling me that the company had collapsed and to contact Ofgem for more information.

It wasn’t until Monday that I started to get actual advice from the likes of Which? and the media on what is going on and what to do next.

Transition process

Being in credit has left me wondering when and how I’ll get my money back. To be honest, I’ve got little faith in how this process will work out.

I know that Ofgem is handling the moving of GB Energy Supply’s customers onto a new supplier, but I’m not comfortable that it’ll be a smooth process for us at all.

And I can’t help but wonder who’s going to take on all these 160,000 customers that now need a new energy supplier. I’m not sure how any new supplier’s customer services team will be able to cope with a sudden influx of 160,000 customers… all trying to get the best deal available. That is, I suppose, unless it’s a one of the Big Six suppliers.

Having to balance my bills, I do worry that the new supplier won’t be able to honour the arrangement I’d had with GB Energy Supply either, so I’ll definitely be calling it to make sure I’m on the best tariff available to me.

This is a guest contribution by Liz Ford, a customer of GB Energy Supply. All views expressed here are Liz’s own and not necessarily those also shared by Which?.

Were you a GB Energy Supply customer before it crumbled? How do you feel about the way its collapse is being handled? Are you concerned about the situation?

Gerry says:
29 November 2016

There are two things Ofgem needs to do urgently.

1. Insist that all energy suppliers also offer a VARIABLE Direct Debit option. This will do away with the nonsense of building up a large credit balance that is then at risk when the company collapses or the customer moves to a different supplier. It will make bills far clearer and make it easier to notice unexpectedly high consumption in a timely manner. Of course, those that prefer Fixed Direct Debits should still have them.

2. Stop Places for People Energy and Iresa deliberately misrepresenting the costs of Economy 7 tariffs on their websites. The claim to offer quotations, but they are only biased guesses because they do not ask for Day and Night usage, only the total. They then assume unrealistically high night usage which means that customers will be significantly overcharged. PPE claims 55% but in my case they assumed an impossible 68%. Iresa assumes 40%. By appearing far cheaper than they really are, this gives them an unfair advantage over their honest competitors who give accurate quotations based on separate Day and Night E7 readings.

I put these overcharging scams personally to Ofgem’s Chief Executive Demot Nolan two months ago at a Which? consultation at the IET in Savoy Place. He agreed that it was completely wrong, but nothing has happened. Can Which? please give him a sharp nudge?

One thing this company excelled at was taking money and creating large credit balances on customers accounts.
When the 30% tarriff increase happened last month many people did the sensible thing and switched supplier.
However – getting their overpayments refunded was met with stonewalling.
It wil be interesting to see if Ofgem lives up to its promise of protecting customers credit balances.

Same issue – multiple requests for a refund of big credit balance ignored over the last 6 months. Met their guys who had a stand t a show in Scotland. Complained personally and received a call the following week saying I would receive refund in 7 to 10 days. Then, nothing heard until collapse announced!

I believe that the first priority should be to ensure that customers of GB Energy Supply and any other companies that fail should not lose their money. Maybe we need something like the Financial Services Compensation Scheme, especially since customers are often forced into having substantial credit balances unless they take regular action.

Far more serious, in my opinion, is the problem of many customers on expensive tariffs. Those of us who keep on top of their outgoings can switch to cheaper tariffs or suppliers, but this means higher prices for those who do not. This will include the vulnerable. I have no problem with switching and haggling for luxury goods but energy is vital for us all. It’s a national disgrace and I suggest that if we care about anyone other than ourselves, it’s time to look at the energy industry with a view to bringing fair prices to everyone.

Like Gerry and Ian, I would like to pay what I owe rather build up a credit balance, though I appreciate that many find it useful to have fixed monthly payments for budgeting purposes. At least Ovo pays interest on credit balances.

It has emerged this evening that Ofgem has selected The Co-operative Energy to take over all of G B Energy Supply’s customers. This was based on “a competitive process to get the best deal possible”.

Ofgem has said that the cost of protecting customers’ balances would be funded partly by The Co-operative Energy and partly by its (Ofgem’s) safety net, funded by a levy paid by all energy firms. The Co-operative Energy has said that it would contact all GB Energy Supply’s customers over the coming days with information on their tariff and credit balance. It also said that any credit on current customers’ accounts would be used to offset future energy use.

This is a better outcome than might have occurred. All GB Energy Supply’s staff will be transferred to The Co-operative Energy on their existing terms and conditions of service; that will at least ensure continuity and adequate customer service and support while The Co-operative Energy absorbs the additional business. Whether any of G B Energy Supply’s energy contracts will transfer to The Co-operative Energy has not been revealed but presumably not as they will form part of the liquidation or administration of the company as potentially tradeable assets.

I have read nothing about people who are in arrears with G B Energy Supply. Presumably the liquidator or administrator will be pursuing such debts but with possibly less tolerance than the company was likely to have done.

Ofgem say “Co-operative Energy is offering GB Energy Supply’s customers the same price as they were paying before, both for customers on fixed deals and on standard variable tariffs. If customers wish to change their tariff, they should ask Co-operative Energy to switch to another deal, or shop around. No exit fees will be charged.”

Wavechange – I was wondering whether you had a view on the image selected to head this Conversation?

It looks as if someone is pulling a cable connected to a plug, confirmed by the image name ‘pull-plug’. That’s naughty to show poor practice. Apart from that, the screw heads are not aligned, which is aesthetically wrong.

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It was the fact that the socket was switched on that alarmed me but it was a poor choice of image generally – but at least it was electricity and not gas that someone was playing with.

I think the image should have been named ‘pull cable’.

I am glad there is someone else who likes to get their screw heads aligned.

I searched for the photo and it is a stock Shutterstock image, entitled “A male hand is pulling an electrical cord plugged into a wall socket”. Which? is a licensed user and many Convos introductions use these images. It’s shocking that this Convo is being led off topic. 🙂

I’m impressed that Which? has launched Convo so soon after the event and that Liz Ford has kindly contributed the topic so quickly.

I agree; this development opens up some interesting questions and It would be helpful if Liz could possibly give us her initial thoughts on being transferred to The Co-operative Energy.

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“I am glad there is someone else who likes to get their screw heads aligned.”

Do I sense some fellow CDO sufferers here?

(CDO is like OCD – obsessive compulsive disorder – but with its letters indexed correctly).

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My OCD is restricted to sockets, door handles, etc. that I fit myself. I don’t bother about others.

Duncan – By writing about the alignment of screw heads I was referring to the slots across the top. In my opinion they should both be at the same angle. I prefer a 45 degree angle if possible. The socket in the picture looks like an MK product and, in my opinion, they are still very good. I would hope this closes this digression.

Hello @johnward and @wavechange, we hadn’t anticipated that the image would spark it’s own discussion here but your feedback is quite enlightening 🙂

It was quite tricky selecting an image to use for this particular Convo, but we do take your comments on board. We’ll make sure that we bear this in mind when selecting an image in future.

Thank you Lauren. I can assure you that nothing is outside our scrutiny!

I don’t profess to know much about electricity but common sense tells me to grab a plug and not its flex when pulling it from its socket. Some plugs even have finger indents to assist when pulling. Inserting a plug with my not so young fingers I find is becoming more difficult than extracting, especially when the socket is hidden away in some dark corner near the ground!

PS I don’t have any concerns about the positions of screw heads on platelets…….. only the ones that are fixed to human bodies 🙂

Not sure it’s entirely your “not so young fingers”, Beryl; there’s been a worrying trend over the past 20 years to produce plugs which look good but lack the shape which makes them easy to withdraw from a socket. It’s actually something Which? might have challenged.

Wire u so concerned about the photo? It just shows an electrician checking why there is no power to the vacuum cleaner by pulling and pushing on the cable – it might have become loose in the plug. Please do not try this at home.

As for screwheads (the socket screws, not the electrician) in joinery when slotted screwheads are exposed it looks really professional if the slots all align. You can do this in wood because it compresses. Plastic does not, and the essential thing is to fix it sufficiently tightly, not to bother about backing off or overtightening for appearance. My sons have an eye for detail and dislike plastic sockets and switches anyway so have fitted metal ones, with a snap-on faceplate that conceals the fixings. I must admit they looker classier than mine.

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I agree Ian , I would welcome that.

The other bit of common sense is to switch off the socket before removing the plug. If you have bought a plug online you might find the pins are not properly insulated and can get a shock when withdrawing it.

I think this is where I came in so I am going to leave this part of the Conversation.

Ian and Beryl, I was being facetious. 🙂 I shouldn’t have bothered.

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Yes, but any credit is due to Ofgem, not HMG, although one can never rule out a bit of arm twisting to get a quick result that puts ticks in a number of boxes.

It has been suggested that we get rid of standard variable tariffs and just have fixed price ones. If GB Energy Supply has failed because it has had to honour fixed price tariffs despite being faced by higher charges, perhaps we should all be on standard variable tariffs. Companies need to make a profit to remain viable.

There has always been a degree of risk with fixed-price tariffs, especially with a commodity like energy which is subject to so many external and global influences where the prices are highly susceptible to volatility. Just predicting demand is difficult enough without factoring in procurement difficulties that require extensive hedging. The bigger companies have been able to offer fixed-price tariffs because they can buy much further ahead, have their own energy sources or production capacity to underpin their pricing structure, offer a spread of tariffs that offset risks in one element, and are big enough to accommodate wholesale market fluctuations. For the reasons that have been advanced here many times, I would like to see fixed-price tariffs abolished leading to more genuine and equitable competition. Good regulation of the suppliers would still be essential to ensure that when wholesale prices fell the benefit was quickly passed on to consumers.

Thanks John.

I should have added that it is not in consumers’ interests to have energy suppliers in such a precarious position that they are teetering on the brink of viability. Some consolidation of the more vulnerable suppliers might start to occur as the pressures on them increase; if it could be done in an orderly way instead of being picked off by the Big Six that would be better. Cultivating a competitive market without allowing the big firms to dominate and dictate is the challenge facing Ofgem.

My suggestion has been to abandon fixed price tariffs and make standard variable tariffs the norm. The subsidy from SVTs to support fixed contracts would then disappear – SVTs should then reduce in cost. However, do not believe the misinformation from Which? and others that consumers will all save £330 a year – £1.6 billion a year. Those savings apply only when some move from SVTs to fixed. If everyone moves don’t kid yourselves that the industry will give up that £1.6 billion. Prices will settle to those which provide an acceptable profit margin that will sustain these businesses.

What will happen to the very many small suppliers? I guess many are short term entrepreneurs who, while wholesale prices stayed low, could temporarily undercut the bigger players (who buy forward). The owners – who simply buy and sell – will have made their money, liquidate their companies or merge with a bigger rival, make staff redundant and find another way to make money without constructive investment.

I’m in a cynical mood today 🙁

It’s more down to an energy company’s bad fixed price forecasting and failure to increase prices at the appropriate time in order to attract more custom.

Fixed prices can often cause people to be less careful in their usage in the misguided belief that, because the price they are paying can’t rise for the duration of the fixed term, they may end up increasing their consumption, using more, therefore paying more. At the end of the day, you pay for what you use.

SVT’s on the other hand, may make people more consciously aware of the fluctuation in prices and therefore the amount they are using and paying for whenever they flick the ‘ON’ switch on, or turn the temperature control knob one degree higher. The downside with SVT’s of course being, can you trust your energy company to pass on wholesale prices when they come down? I would think the larger ones are much less likely to as they probably have the interests of many more private investors to be accountable to.

I agree with you Beryl. Removing a whole layer of complex tariff differentials across the market would make selecting a supplier more transparent and straightforward.

Your closing point reinforces the need for a tight regulatory regime.

I suspect many people joined GB Energy on their fixed price contracts – when you search for lowest prices that is where you’ll invariably end up. So rising wholesale prices mean they can no longer service those contracts at a profit. And, of course, GB could not increase those prices for existing customers – that is the basis of the contract. So at some point the business model fails.

As I said elsewhere my guess is entrepreneurs are trying to make money in the short term and are prepared to terminate their businesses when things change.

I would dispute the idea that people who get lower prices then deliberately use more energy. How do they do this – wash more clothes, open all the windows, turn up the heating? The vast majority will want to use lower prices to save money. My own usage does not change, whatever my tariff. The way I use the heating, cook, wash, fridge, tv, vacuuming, are not activities that are likely to vary, other than with the weather.

One reason I doubt smart meters will have any real impact, once any novelty might have worn off. If 60% of people stick with variable tariffs, despite knowing they could pay significantly less, are they likely to sit down in front of their smart meter to analyse just how they use their energy and how they might make savings?

Malcolm, the point I was making in my previous comment was that GB failed to anticipate the price increases just around the corner. Was this because they were hoping to attract more customers with lower prices they couldn’t meet? Not very good business practice in any event.

My second point was to explain reasons why in your comment you state “do not believe the misinformation from Which? and others that consumers will all save £330 pounds – £1.6 million a year.” I am pretty sure that no one would deliberately use more energy intentionally, but someone during this sudden cold spell for example, maybe tempted to turn up the temperature a few degrees if they were on a fixed rate tariff as opposed to a variable rate in the misguided belief that they won’t be charged more. They are charged on the amount they use. It’s human nature to want to buy more if it costs less.

If you log onto OVO at the website address below, this may explain the wisdom of anticipating energy price increases so as not to lure prospective new customers into believing they are getting a cheaper tariff.

I sincerely hope the cynical mood improves as the day passes 🙂

Following their fixed price August 2016 increases, OVO have announced a 5% price increase of its PAYM (variable) tariff, effective January 2017 for dual fuel customers, but also at the same time, a £10 reduction in standing charges. It comes with reassurances that customers are in safe hands with them this winter! Gas only customers however, will see a decrease to their prices.

To read more log onto: http://www.ovoenergy.com – OVO You’re in safe hands with us this winter – Pricing Statement 21st November 2016 – OVO is changing the price of its PAYM Simplex (variable) tariff.

I agree John, it certainly does get more confusing!

I switched to GB Energy early this year to a fixed price tariff that gave a better deal than my existing supplier. In October I shopped around again and found a better deal with one of the “big 6” so set a switch in progress. That has gone through successfully as far as I can see. I had 4 emails on the same day from GB Energy advising that I was in credit – 3 different amounts that only differed by a few pounds, but the final one was one I agreed with when I checked my own calculations. On Saturday I heard about their demise and checked my bank account to see if the credit had been refunded; it showed up as have been and when I checked again today it was still their, so hopefully I won’t have to do any more.

I do not see the need, nor the advantage to the consumer, of between 37 and 44 energy suppliers (depending where you look). That is free enterprise but unlikely to be sustainable. Some are simply arms of other bigger companies – like Sainsbury is to British Gas – but I suspect many of the rest will disappear os wholesale prices rise and their money-making days disappear. Make hay while the sun shines (or as the frost lies as it did today).

There seems the possibility that GB Energy failed partly through greed. It, according to Private Eye, allegedly paid £2.5 million “for developing and running the websites” for companies where one person is a common director and GB shareholder. Expensive websites, 8 times GB’s wages bill and the same cost as it paid to distribute energy to its customers, according to PEYE. I wonder how many other small energy companies are in it for short term gain, with their demise then funded by their larger counterparts (and ultimately us, through higher prices)?

I moved to green star energy in Feb. 2017 for electricity supply. I decided to leave them in early March 2017 due to poor customer service and contact problems (not fit for purpose). I moved back to NPOWER and it took 6 months to get supply returned to them due to problems with green star. Finally got things sorted with help from OFGEN and am waiting with baited breath for the money due to be paid back into my account.
In total a 7 month painful experience which I will not repeat.

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