What’s stopping you switching your energy, broadband or mobile provider?

I wish my supplier would go bust! They so messed up my switch from EDF Energy that no other supplier will touch my supply with a (fibreglass) barge pole. They are holding £1000s in credit that they won’t return, and ignore any requests for a bill or to switch tariffs.

Unfortunately, but understandably, Ofgem’s control on the viability (financial security) of energy suppliers was not retrospective. Many small ones are, or were, making hay while the sun shines, trading on low wholesale costs to offer good deals. They do not have the ability to ride out significant increases in wholesale costs because they have not protected forward purchases. They can take their rewards and leave the remaining companies to pick up the bills – usually repaying the credits customers have built up.

If we do end up with 10 suppliers that seems enough to me to ensure a continuing competitive market.

I agree that ten energy suppliers could provide adequate capacity and competition, but I would prefer to see a structured reduction to that level with a well-balanced industry emerging at the end of it rather than a freefall meltdown which could happen in the present circumstances.

I see that Ofgem has asked Avro to provide information, which it has so far failed to do so: https://www.ofgem.gov.uk/publications/ofgem-orders-avro-energy-provide-financial-information

Is it too much to ask for Ofgem to investigate companies prior to granting a licence to supply electricity and gas, and to monitor performance annually?

Yesterday I posted this in a Conversation about malfunctioning time clocks; probably not the best place now this Conversation is running –

“Apparently, according to the BBC News website, four more small energy companies could collapse in the week ahead as a result of the steep rise in wholesale gas prices: “Industry sources have told the BBC that four firms have asked larger players to bid to take over the supply to one million customers.” The names of the companies have not yet been disclosed.

The article goes on to say that “at the beginning of 2021 there were 70 energy suppliers in the UK. Industry sources say there may be as few as 10 left by the end of the year.” See —
https://www.bbc.co.uk/news/business-58610561

The collapse of a further 50 or more firms over the course of three months would be an immense logistical challenge in reallocating all the customers affected to whichever suppliers have survived and absorbing their accounts. I can’t even contemplate how Ofgem is going to manage it successfully and protect consumer’s interests. Perhaps the government will have to nationalise some of the firms or enforce some amalgamations to create new companies and provide them with sufficient resources to enable them to operate for a specified period.

As well as transferring customer accounts the expiring companies’ supply contracts will all need to be disentangled and terminated or transferred at higher rates so the implications of such a situation might not be limited to customers of the firms at risk.

The light at the end of the tunnel of competitive energy pricing just went out.”

[ https://conversation.which.co.uk/home-energy/economy-7-energy-meter-clock-overpayments/#comment-1636501 ]

Ofgem introduced stricter financial requirements for all energy suppliers, before they would grant a licence, earlier this year but they could not be retrospective. So we still have many energy suppliers who are under-capitalised and vulnerable.

As far as monitoring suppliers ”Ofgem is issuing Avro Energy with a provisional order, which compels it to provide the regulator with financial and other information relating to the company’s activities.

Failure to comply may result in further enforcement action being taken by the regulator which could include a fine, or Avro Energy being stripped of its licence to operate in the GB market. ”

https://www.ofgem.gov.uk/sites/default/files/2021-08/Open%20letter%20-%20Retail%20financial%20stability.pdf

I dread to think of the fallout that might result from the failure of Together Energy. I have no evidence one way or another to suggest this might happen, except that last year’s accounts have now been filed, showing further losses of £4 million for 2020, making a total of £23 million, plus eye-watering interest rates of 11% on its outstanding loans.

What could turn this into another local government scandal of epic proportions, is Warrington Borough Council’s ill-advised investment in this private company. This was done through the issue and purchase of £18 million worth of preference shares, when the company was already making a loss. These accrue a guaranteed dividend of 7% which has never been paid, but accumulates as a debt on the accounts until such time as Together Energy manage to turn a profit and are legally able to pay a dividend.

Warrington Borough Council on the other hand (according to press reports) are recording these phantom dividend payments as income in their accounts.

The minority Conservative and Liberal councillors are unhappy about the lack of transparency over the deal. What the ratepayers will make of it, I’ve no idea.

So it looks like double jeopardy if Together Energy were to fail. Both electricity consumers and Warrington ratepayers will be picking up the tab. Who allows this sort of mismanagement of public money?

I won’t provide links as I haven’t had time to research this fully (E.&O.E. applies). But please Google [Together Energy Warrington] for information and any updates on what could become a “hot” topic before the end of the year. Maybe that will provide a new source of cheap sustainable energy.

Robin Hood Energy was just as badly supported by Nottingham City Council, and now apparently Enviroenergy, their district heating venture, is going into liquidation. I wonder what permits incompetent amateurs to throw away council taxpayers’ money?

If I understand correctly, failed energy suppliers Robin Hood Energy and Bristol Energy – the latter ironically taken over by Together Energy, which has probably just added to the risk – were started by their respective local authorities around 2015, perhaps with good intention.

What I don’t understand is why Warrington, and very late to the table, would invest in a loss-making private company. This at about the same time as Robin Hood and Bristol Energy were already struggling, and Covid-19 was so serious that even large banks and other financial institutions were warned not to pay dividends, but hold the money for contingencies.

Latest on the energy price hikes, BG are to take on 350.000 customers from collapsed Peoples Energy. The government is now considering loans for struggling smaller energy companies, presumably to avert a return to Big Six monopoly.

70 energy companies – about what we have today (but unlikely next month) – is far far more than we need for a competitive market.

Six is not a monopoly. However, some have predicted we will end up with around 10 and that seems quite enough for a properly-functioning market.

What the current temporary crisis has exposed is our over-reliance on wind farms that don’t contribute enough when there is little wind, as has been the case. We need a more balanced spread of renewables, and ones that are more predictable than wind and solar. These should include harnessing tidal energy. We will also, perhaps worryingly, require much more nuclear generation but unless we get our skates on and re-establish a proper UK design, manufacture and build policy we will not be able to meet the domestic gas and fossil fuelled car replacement policies.

“Six is not a monopoly” says malcolm, and we don’t need 70 energy companies to ensure competition. True enough! Someone can always undercut the rest and sell cheaper for a time, but there is a limit to how low anyone can go in selling exactly the same product from the same wholesalers – in this case electricity.

I struggle to think of even six retailers I would trust to buy appliances from that consume electricity. Not that I liked Currys or Comet, but at least there was some alternative in the retail parks. That is more of a concern.

Six is not a monopoly if the market share is evenly spread across them but it could lead to one or two of the survivors having a technical monopoly of over 30% of the domestic market. It would also depend on whether the market share is determined by reference to number of households or energy volume supplied.

It has recently been reported that unspecified ‘industry sources’ regard the prospect of ten energy companies surviving this situation as “optimistic”.

A recent development in this situation is that Ofgem is having difficulty in persuading the major energy companies to take on the customers of the closed suppliers under their safety net scheme. To some extent they are under an obligation to cooperate with Ofgem in this process but are reluctant because it might jeopardise their own viability. They are therefore looking for further incentives in order to support the rescue efforts and state-backed loans have been under discussion.

Here is an article that mentions state-backed loans: https://www.theguardian.com/environment/2021/sep/20/uk-energy-firms-could-get-state-backed-loans-to-take-on-customers It mentions that the UK has suffered higher price rises than some countries in Europe.

Then it’s time for Boris to deliver on removing 5% VAT from energy supplies. He had both the Brexit mandate and now the PM’s authority to make good on his promises. What is he waiting for?

Probably waiting to put a mileage tax on electric cars to help redress the loss of full vat and fuel duty on ordinary private cars. We have a heavier tax bill to fund what with Covid and social care that has to be found somewhere.

Thanks, Wavechange. The article reports that British Gas will be taking on People’s Energy customers but no mention has been made of which company will be taking on the customers of Utility Point which also collapsed just over a week ago. This might be evidence that Ofgem is already struggling to line their safety net up safely.

I expect one of the reasons for the UK’s higher energy costs compared with some other European countries is that, as Malcolm said previously, we raced towards unreliable renewables. In doing so we also gave up other capacity prematurely, have a hiatus in nuclear replacement capacity, and have poor gas contracts involving the wrong sort of regimes! We now only need a biomass bulk carrier to break down on the high seas and we shall be right in the clarts.

Cocker draws our attention to the increased revenue from VAT that will accrue to the Exchequer from any further hikes in energy prices.

Perhaps its now also time to reform the Winter Fuel Allowance to ensure that the most needy get it but the wealthy [and those who’ll now be shifting to the Mediterranean for the winter] don’t.

I mentioned above that by looking at the accounts of Avro Energy, the auditors had doubts about going concern. Just a couple of weeks ago it was the top recommendation for me by Which? Switch, but now the company has failed: https://www.bbc.co.uk/news/business-58652083

I would be grateful if Which? would check for obvious problems before recommending suppliers.

I have a 2 year fixed price account with OVO which expires 28th August 2022. If they were to become another casualty of gas hikes, would the same terms of this contract be transferable to another OfGem appointed supplier?

Not necessarily, Beryl.

From the BBC article referenced by Wavechange : “If an energy firm collapses, customers are automatically switched to a tariff provided by the new supplier. This is a payment plan agreed with the regulator Ofgem, but it may well be more expensive than the deal they had with the former company which went bust.“

It is a bit hit and miss John. There are no guarantees.

Many will be keen to know what will happen in these uncertain times. From what I remember, Ovo were running their domestic energy supply at a loss but that is only part of their business. Thanks to the take over of SSE customers, Ovo is now one of the larger suppliers, even if they are not in the best position under the present circumstances.

We know that suppliers of failed energy companies will be transferred to another supplier but I don’t know about the terms of the contract. You have asked an important question, Beryl.

Information from the Ofgem website regarding customers transferred to another supplier:

“Will I be on a different contract with my new supplier?

Yes. Your old tariff will end.

Instead, your new supplier will put you on a special ‘deemed’ contract. This means a contract you haven’t chosen. This contract will last for as long as you want it to.”

At least you will have the opportunity to move to another supplier.

OVO offered SSE fixed rate customers the same fixed rate terms when they were transferred, but under different circumstances: ovoenergy.com – Questions About Moving From SSE to OVO. I hope they are able to survive this next crisis.

I predicted that this is the beginning of a real sort out of small energy suppliers when their weakness in the face of significant increases in wholesale costs becomes apparent. Whilst I believe in business and competition it must be remembered that most of these small companies are run by people out to make money for themselves without the financial foundations needed to sustain a business through bad times as well as good. They may cream off the profits before the collapse, so have achieved their objectives, leaving the other companies (and hence the consumer) to pick up the bill.

Hopefully Ofgem’s current financial requirements will reduce the likelihood of this happening in the future.

We do not need 70 energy suppliers.

It looks highly likely that the government will have to subsidise many of the customers who have been put back into the market by the failure of their supplier because, otherwise, given the energy price cap other companies will not want to take them on to lose even more money.

I think the price of gas has increased so significantly due to extraordinary circumstances and will come back to normal in not too many weeks – as has happened to oil in the past. So ditched customers may well find it worth living with a (capped) standard variable tariff in the short term and, hopefully, when things return to normal, then choose a fixed term fixed price tariff at a more sensible price than is currently available.

My new contract with Ovo starts on 4 October, Beryl. Unlike other large companies I have been with Ovo have never increased my direct debit when I have been well in credit.

I tend to increase or top up when necessary Wavechange to make sure I stay in credit, which is what I like about OVO, and they are still offering 5% on end of term credit balances.

That’s what I have generally done in the three years that I have been with Ovo at this address. I did not expect to be staying with Ovo because they were looking expensive when I checked a few months ago.

Good luck with finding a cheaper one at the moment. Keep us informed. I’m on the lookout for a good deal but now may not be the best time to commit to one.

Two of the cheapest energy companies reported by Which? as recently as April this year have now gone bust: https://www.which.co.uk/news/2021/04/top-five-cheapest-energy-supplier-deals-for-april-2021/

Now apparently is not a good time to go for a fixed rate term while prices are high as gas prices are expected to fluctuate in the future as with petrol prices. It’s advisable to wait until they come down and in the meantime look for the cheapest standard variable.

Aware of the likely fluctuation in prices I chose a one year contract this time. Assuming that our supplier survives I won’t be paying much more than I am at present.

The price cap on energy costs has been criticised but it could help protect the vulnerable.

But is it the energy companies role to do that? I don’t think so; social security have that job where they can target help. The rest of us need to live with the market.

OVO have a pretty good track record when it comes to admin and allowing for future price hikes, for example the SSE acquisition was probably a good move, hopefully increasing their size will see them through this crises. It’s all a bit uncertain at the moment. We can only speculate.

I hope so. They are also buying electricity from renewable resources which might help further investment.

A couple of years I was concerned about Which? mentioning ‘Outfox the Market’ (Foxglove Energy Supply Ltd) as a cheap energy supplier but despite my doubts it has survived and is well rated by Which? I do hope that we don’t lose more companies.

Malcolm – Many consumers have, over the years, failed to switch to cheaper energy tariffs despite switching being a relatively straightforward process for many of us. It’s a lot easier to cap the energy price rather than expecting them to jump through hoops claiming benefits.

Capping the energy price benefits everyone, whether in need or not. I prefer to target benefits – taxpayer’s money – at those who genuinely need financial help so it is used to best effect.

The reasoning has been explained by the government. Sometimes we should think about people less fortunate than ourselves. Anyone with a reasonably modern car will pay more in depreciation per year than their bill for electricity and gas.

Would you like to explain the relevance of this ”Sometimes we should think about people less fortunate than ourselves.” to what has been said? As far as I can see, targeting help through the benefits systems is far better than giving everyone a “subsidy”, irrespective of their financial situation. It makes proper use of taxpayers’ money. But I may have missed the point you were making.

It’s not true that everyone is given a subsidy. Many of us check prices periodically and switch to companies that offer prices below the current cap.

It looks as if the government will be effectively subsidising some energy customers by providing loans to help their energy companies survive.

I agree with Malcolm on it being the role or government and the welfare state to support the vulnerable. Energy companies are already bound by various regulations and obligations with regard to tariffs, disconnections, payment arrangements and other conditions. But the state must step up to the mark when problems mount as they seem to be doing at the moment.

In a recent comment, Em mentioned the triple lock pension safeguard which is being partially suspended next year. Energy prices are an important component of the cost of living and will feed into the consumer prices index which is used as one of the bases for the triple lock. Only the average earnings growth rate is being temporarily removed from the triple lock formula. The cost of living index and the 2.5% minimum threshold will remain as factors in setting the level of the state retirement pension but this is calculated on the September inflation rate so any higher energy prices later this year will not count for next year’s pension increase although the energy price cap will still apply, albeit possibly at a yet higher level.

About 15 million households in England, Wales and Scotland face a 12% rise in their energy bills from October, when a higher energy cap is due to come into force. Northern Ireland has a different price cap mechanism. The energy cap sets the maximum price suppliers can charge customers on a standard [or default] tariff:

:: Those on standard tariffs could see an increase of £139, from £1,138 to £1,277 a year.
:: People with pre-payment meters could see an increase of £153, from £1,156 to £1,309.
:: Households on fixed tariffs will be unaffected, but those coming to the end of a contract probably won’t be able to find a cheap deal to replace it.

These are substantial percentage increases but energy is only one part of the rate of inflation. Some other costs in the overall bundle of living expenses have been falling or are stable but there are price pressures in other areas such as food and household products.

The July 2021 inflation rate was 2% but it will be a couple of months before the September rate is declared. I would forecast that next year’s state pension increase will not exceed 2.5% but in six months’ time inflation could be running at 4-5%. This system does not automatically apply to other welfare provisions or to people on low incomes but below pension age. The government’s response to appeals for the £20 temporary uplift in Universal Credit to be retained is that wages are rising strongly and there are more job vacancies than for a very long time.

Even though pensioners have been benefitting from above-inflation pension increases for some time [due to the triple lock] I think there will be hardship in that sector and also among other sections of the population who, for a number of sound reasons, do not have the opportunity to increase their incomes. Wage rises are not evenly spread out across the economy and job opportunities are certainly not available in all regions or all industries.

I should be very surprised if we are not heading for another period of recession which will affect any sense of economic bounce-back after Brexit and Covid-19. This forecast does not require any special insights and I expect it is widely feared. I just hope the government is flexible in considering the needs of the most vulnerable people in society and will take measures that will help them as a priority. At the moment, I get the impression there is an over-confident attitude of “Crisis? What crisis? Don’t worry . . . Everything will be all right” in the top circles of this government reminiscent of Jim Callaghan’s government in 1978 which fell after a vote of no confidence. That is unlikely now given the parliamentary arithmetic so I hope over-confidence does not turn into arrogance.

As far as I am aware the government have refused to support failing energy companies. Quite right too, if they have a poor business model. We need far fewer of these suppliers.

”It’s not true that everyone is given a subsidy.”. In this context those on capped standard variable tariffs are likely to be getting a subsidy, as are all those, rich and poor, who receive the winter fuel payment.

By avoiding paying subsidies and other payments to those not in need we would make possible better benefits for those who really need them, thus ”I, for one, am thinking about people less fortunate than myself”

If different broadband providers are using the same cables there is unlikely to be much difference between suppliers, Dan. Nowadays you will get a minimum speed guarantee and if the company cannot meet this you will be entitled to end your contract: https://www.ofcom.org.uk/phones-telecoms-and-internet/advice-for-consumers/advice/broadband-speeds-code-practice