Early rise in energy bills to cover collapse of suppliers

ENERGY suppliers that take on the customers of failed rivals are to be able to recoup the costs of doing so faster, in a potential blow to millions of homes.

Regulators are proposing the move in an attempt to ease the strain on large companies that have had to fork out millions of pounds to buy energy for new customers as soaring wholesale costs push rivals out of business.

But the proposal has raised concerns about a steeper hit to household bills next year when the energy price cap is already set to increase. Extra costs for other suppliers is also a concern.

An industry insider said: “This is a regressive move engineered by large energy companies which will lead to substantially higher bills for many consumers next year.

“A fairer solution would be for network companies to delay the increase to their charges until 2023, and then recover them over a five-year period.”

In a letter to suppliers last week, Ofgem, the regulator, warned of potentially “significant” rises to network charges from April. It said: “We appreciate the negative impact this will have on consumers and, possibly, suppliers remaining in the market. We are therefore exploring how to mitigate this impact.”

Nineteen relatively small suppliers have collapsed since the start of September, affecting about two million customers, as a global gas supply crunch has pushed wholesale gas and power prices to record levels.

Under Ofgem’s safety net procedure, their customers are passed onto surviving companies. The new provider pays the costs of buying energy for them, honouring credit balances and moving them onto their computer systems.

The suppliers are able to recoup these costs from the rest of the industry via a levy system that is ultimately paid for through customer bills.

Chris O’shea, chief executive of Centrica, which owns British Gas, has estimated the current crisis could add about £100 to every household bill.

Normally, these costs could take 15 months to appear in bills, but under Ofgem’s proposals, network companies will be able to raise their charges from April next year.