Is £800million of energy customer’s money a ticking time-bomb? - Green Energy UK urges OFGEM to stop energy suppliers taking upfront payments from customers

05 July 2019

Will OFGEM’s supplier licence rules be enough to avoid further supplier failures & customer misery, warns Green Energy UK’s Doug Stewart

Doug Stewart, CEO of Green Energy UK, the first energy supply company to call for stress testing of new energy suppliers, has urged OFGEM in their continuing supplier licencing review, part of which comes into force on Friday (July 5th), to put an end to upfront payments from customers and instead, mandate all suppliers to bill their customers in arrears. Doug Stewart said: “I remain concerned that suppliers’ use of credit balances (estimated to be in excess of £800m) is a ticking time-bomb. In this difficult market, it’s an unnecessary risk for both customers and prudent energy suppliers. Utilising advance billing and creating a “fund” of £800m of customer’s money isn’t a safe way to run a business.

“If the business goes bust, who pays? In the energy industry, it’s compliant suppliers who pay via OFGEM’s safety net. Instead, suppliers should be operating within the cash flow of their business. I therefore hope that OFGEM mandates suppliers to bill in arrears. “Tougher rules on new entrants are part of a solution, but what about the loss-making suppliers currently in the market? At what point do they stop playing roulette with customer deposits and start to make a return? “Last September, we had a record number of suppliers failing to meet their Renewable Obligation payments, a payment they had up to 18 months credit on. What’s going to happen this September? It will be another nervous time for some suppliers, their people and most of all their customers. “And if Citizens Advice are to be believed, all of us all have paid at least £172m so far to bail out the reckless loss makers.” Green Energy UK’s proposed safety checks for energy companies, submitted to OFGEM in January 2019, also included test/checks on suppliers when there is a change in ownership, and test/checks on white label suppliers.

With regard to mutualisation of energy costs when there is a supplier failure, Green Energy UK believes that the current Supplier of Last Support Regulations place well-run suppliers at a disadvantage, as the regulations expect these suppliers to mop up the costs of failed energy companies, which then get passed onto customers. Green Energy UK has established themselves as a pioneer in energy services. Established over 15 years ago, it is the only energy supplier to provide customers with a 100% green energy offering for both electricity and gas. It was the first UK company to offer customers a Time of Day Tariff - launched at the beginning of 2017.