Households in Britain face picking up a £172million tab after the collapse of more than a dozen small energy firms.
The worrying figure comes ahead of a reduction in the energy price cap – which limits how much suppliers can charge customers on their most expensive tariffs.
It also follows the collapse of challenger supplier Solarplicity, which crashed after failing to improve satisfaction scores following a ban from Ofgem earlier in the year.
And it’s not alone. Brilliant Energy, Our Power, Economy Energy, One Select and many more have fallen at the hands of customers in the past 18 months.
In fact, while the Big Six have (admittedly) been slapped with fines for breaking rules and poor customer service, it’s the smaller firms that have actually folded, leaving households on price plans they never signed up to.
It’s left people wondering whether the risk for a cheaper bill is even worth the hassle.
Famed for their rock bottom rates, challenger energy firms are largely eco-friendly – ie better for the planet – and their prices are incredibly competitive, too.
But how reliable are these companies and are they worth the risk? We’ve taken a closer look.
Emerging suppliers – and what you need to know
Back in 2006, there were around 10 energy firms in the industry – today, there are more than 80.
It grew after Ofgem introduced new rules in 2013 to make the market “a more level playing field” for transparency, competition and pricing reasons – and it’s paid off.
Competition has – to a degree – led to lower prices and customers seem happier, too.
In Which?’s most recent customer satisfaction report, all 10 of the best performers were independent suppliers – while 7 of the worst were leading ones.
They even offer revolutionary services such as Octopus energy’s smart tariff that actually tells you when it’s cheapest to turn on your washing machine and other home appliances.
But at the same time, firms are collapsing, with more than a dozen going bust in the past year alone.
While this hasn’t led to any blackouts, it has resulted in customers being shunted onto more expensive tariffs with suppliers they never signed up to – which poses its own problems.
So what’s being done?
Energy Saving Discounts
It an attempt to mitigate the problem, Ofgem has now launched a crackdown on new suppliers.
They’ll have to prove they have adequate plans in place to deal with complaint handling as well as being able to demonstrate what their funding arrangements are.
Ofgem executive director Mary Starks said: “The new requirements will help us to weed out those that are underprepared, under-resourced and unfit to hold a licence.”
But wait, shouldn’t we be encouraging more ethical suppliers?
Yes – but not just for the sake of it.
Firms such as Bulb are not only attractive in the price department, but also the ethical one. They use clean sources of energy that have a much lower environmental impact than conventional technology – and it’s reducing climate change.
But while these firms are doing the planet good, several have also been slapped by penalty fees and closures leaving households high and dry.
In November 2016, GB Energy collapsed after being hit by increased wholesale costs. Three months later Future Energy followed, leaving 10,000 households without a supplier.
While more recently, eco supplier One Select collapsed.
So what should I do?
Check their ratings.
Supplier Solarplicity, which went bust in August, had 7,519 ratings on Trustpilot – with 54% classed as ‘bad’ at the time of collapse.
But at the same time, 56% of Good Energy’s reviews are currently ‘excellent’ versus 13% ‘bad’ ones.
Which is exactly why it’s important to do your homework.
Find out what people are saying about these firms – and shop around for the one that suits your needs.
Green provider Bulb for instance, has a 91% positive rating on Trustpilot as does award-winning Octopus energy.
However, that doesn’t mean they should all be avoided – here’s how to choose a safe supplier.
How to make sure you’re switching to a safe supplier
Experts say you should be comparing energy prices at least once every six months to ensure you’re on the best possible deal for your usage.
If you’re on a fixed term tariff (these are typically the cheapest) you’re free to leave penalty free 49 days before your contract ends. If you’re on a standard variable tariff, you should think about switching now.
But where to go?
“There are hundreds of pounds in savings to be made by switching energy supplier and consumers should shop around for the best deal for them,” explains Ofgem.
“Consumers can visit Citizens Advice’s free to use energy star rating performance table, which ranks energy suppliers on their complaints handling to help make decisions about switching.”
To find the best tariff for you, follow our energy switching tips. Once you have a list, start doing your homework.
“One possible indication of a company’s health is its customer rating value, which you will find on most comparison sites including our own,” explains Peter Earl at Comparethemarket.
Sites such as Trustpilot will tell you what current customers think of the company. You’ll also be able to spot any red flags or warning signs.
Citizens Advice regularly publishes data on customer service and complaints handling based on the nation’s energy suppliers, which is a good place to start.
The Energy Ombudsman also tracks the details of what complaints are being made about which supplier, how quickly they rectify issues and even typical compensation payouts.
It is a little tougher when it comes to judging a company’s financial position though.
While you don’t need to go through the supplier’s accounts in detail, it’s worth doing at least a little background to check that there haven’t been any stories about the firm having financial troubles. Read forums ask friends and family for advice, and run it through a search engine.
Am I protected if it all goes wrong?
If your supplier does collapse, the good news is that it doesn’t mean your gas and electricity will suddenly be switched off.
Instead, you will be moved to a new supplier, selected by Ofgem.
You can then choose to switch to another supplier without any exit fees, though you’ll have to wait until the new supplier gets in touch with you before beginning the switch.
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