Clare Moriarty: Action is needed now to avoid a winter of discontent for energy customers
More than half a year since the energy market went into freefall, the bill for supplier failures is still mounting.
Latest estimates put the tab at £4.6 billion. This includes £2.7 billion on managing supplier failures and around £1.9 billion of taxpayer funds being used to cover the running costs of Bulb.
These eye-watering figures have real world consequences. Energy customers could see up to £164 added to their bills, piling extra financial pressure onto families at the worst possible time.
Today the Public Accounts Committee will quiz regulators on how this was allowed to happen. The consensus is already clear: the UK energy market was in a precarious position and a spike in global gas prices tipped it over the edge.
Ofgem, the energy regulator, allowed a culture of rule-breaking from suppliers to take hold and was too slow to act when it did. Citizens Advice found multiple instances of systemic failings stretching back almost a decade.
Since then, progress has been made. Ofgem has beefed up its rules so that companies can’t take such huge gambles with their business models. The hope is that what happened last autumn won’t ever happen again.
The government must improve the supplier failure process and ensure people struggling aren’t chased for debts or left in limbo
But a focus on how we got into this mess means its fallout has been overlooked. Our evidence shows that the process for managing supplier failures is still flawed and unwieldy. This is the long shadow of last autumn’s market meltdown that continues to hit customers calling our support services.
It’s true that most who saw their energy firm go bust were moved swiftly and efficiently to a new supplier, but some faced months of misery.
One person contacted us because their disabled brother’s £500 credit balance had vanished into thin air when their supplier failed. Another rang because they were cut off supply in the transition and had no way of topping up their meter - leaving them unable to keep the lights and the heating on.
Customers who were moved to a new supplier were twice as likely to be unhappy with customer service than those who hadn’t. They were also almost twice as likely to think their bill was wrong. We’ve heard time and time again from people pushed from pillar to post with no clear idea of who could solve their problem and what their rights were.
On top of this are worrying cases where the administrators of failed companies are chasing people for old debts. In normal circumstances energy suppliers have to support you if you’re struggling to make repayments. Administrators have no qualms about using aggressive tactics like employing debt collectors to knock on doors or demanding repayment in full at short notice.
Given the further hikes expected to energy prices, and with that the risk of more chaos for bill payers, it’s clear an overhaul is needed. The government must improve the supplier failure process and ensure people struggling aren’t chased for debts or left in limbo when they need a refund.
Ofgem has to play its part and ensure that suppliers stick to its rules. That includes making sure customers are treated fairly by their new supplier and supported if they’re struggling to pay their bills.
Building back trust in the energy market will take time, but it’s essential to prevent further fallout and make sure the system is future-proofed. Customers deserve a commitment from Ofgem, suppliers and the government that they’ll be better protected in the choppy waters ahead.
Dame Clare Moriarty is chief executive of Citizens Advice.
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