Energy supplier Scottish Power has hit out at "unsustainable" pricing among smaller rivals and called on regulators to protect payments made by customers in advance.
More than 20 small to mid-sized energy companies have collapsed since September 2018, with several owing millions of pounds to customers for energy not yet delivered, as well as other industry payments.
Under regulator Ofgem's procedures for supplier failure, a rival company is appointed to pick up failed suppliers' customers and pay them back, and can then recoup the costs from the rest of the industry.
Scottish Power was appointed to take on Extra Energy's 129,000 domestic and business customers when the latter collapsed in November 2018 . It is now applying to Ofgem for £6.5m to help cover remaining customer credit balances, after funding the first £10m.
Andrew Ward, chief executive of Scottish Power's retail unit, said: "We've raised our concerns time and again that the pricing position of small suppliers is not sustainable and recently called again for Ofgem to require suppliers to protect and ring fence customer credit balances and government obligation payments to ensure customers were protected if companies get into difficulty."
He added: "We want to build a competitive and fair energy system for all energy consumers and to do that we need to see real action taken by Ofgem."
New suppliers have rushed into the market in recent years amid efforts to encourage competition, but many offer below-cost tariffs and do not have the financial backing to withstand volatile costs and fierce competition.
Shell, the oil and gas giant which entered the UK household energy supply market in 2018, blamed market conditions including "unsustainable, below-cost pricing across the market" this month as it posted losses of £26.7m for 2019, compared to £5.9m in 2018.
Last year Ofgem toughened the financial checks for companies entering the market, in an effort to reduce the risk of supplier failure and the costs to the rest of the industry.
Jonathan Brearley, Ofgem's chief executive since February, recently told The Telegraph it was considering whether further measures were needed, adding the regulator needed to strike the right balance between allowing new entrants and making sure suppliers were not too fragile.
Yorkshire Energy became the latest supplier to collapse in December, with its 74,000 customers also being taken on by Scottish Power.
There are concerns further coronavirus lockdown measures could increase levels of customer debt, putting more pressure on suppliers.
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