1 in 10 small power suppliers ‘may not survive the winter’

Insider’s bleak warning as energy price cap and green taxes bite ...

AS MANY as one in ten small energy suppliers face a battle to survive the winter after struggling to pay their green taxes.

The chief executive of one medium-sized supplier told The Mail on Sunday that he had been approached by seven rivals – out of about 70 which compete with the Big Six – which were looking to offload customers.

He said some had admitted they missed the final October 31 deadline for paying their environmental taxes. This is seen in the industry as a sign that a supplier may be on its last legs.

Regulator Ofgem declined to reveal how many companies missed the final deadline, but said it had appointed an external auditor to address a multi-million pound black hole in the environmental taxes collected this year.

An unprecedented 34 companies missed the first payment deadline in August, leaving a shortfall of £103.9 million. Several industry sources said they believed up to £50million was still outstanding.

Historically, suppliers which have missed the final tax deadline have gone into a tailspin. They typically face fines from Ofgem and a ban on signing up new customers. Of the three companies which failed to pay last year, two went bust and one was taken over by a rival.

Extra Energy is understood to be one of the suppliers which failed to pay its full bill in time.

The Birmingham-based company, which has more than 500,000 customers, is already under investigation by the regulator over potential rule breaches on billing, customer service and complaints handling. It came 29th out of 31 companies for customer satisfaction in a poll by consumer group Which? Extra Energy declined to comment.

Another small supplier, Spark, admitted last week that it had missed its payment and owed Ofgem £14.4million. Spark bosses are now in talks with an unnamed rival about a possible merger.

If left unpaid, the £50 million funding gap will heap pressure on more solvent energy suppliers. An Ofgem spokesman confirmed it would be asking other companies to make up the final shortfall. The energy chief contacted by the struggling rivals said: ‘All seven were saying they are worried they won’t make it through the winter.

‘With the havoc caused by the price cap and now this, it could be a very tricky end to the year.’

He said one firm told him it had paid its Renewables Obligation Certificates, which fund green energy projects. He believed three others had secured funding to pay their bills, but still faced an uncertain future.

Two other energy suppliers privately told The Mail on Sunday that they have been approached by rivals about taking on customers.

So far this year a number of firms, including Usio and Iresa, have gone bust. Part of the problem has been rising wholesale costs and the new price cap on variable tariffs which comes into force in January.

Several industry sources said they believed the amount in outstanding green taxes was between £30million and £50million.

Tikendra Dewan, a former Gurkha and founder and chief executive of GnERGY, a small energy supplier which has paid its renewable obligations, said: ‘The Government should give some serious thought to helping small suppliers like us. We only have 10,000 customers but we met our commitment for £831,000.

‘I find it hard to digest that Spark has 297,000 customers and a turnover of £230million but could not meet its obligations. To my mind that shows a lack of responsibility.

‘If they are allowed to merge with another firm without paying their dues – and suppliers such as us have to pay extra instead – it would feel like they are laughing their way to the bank while the rest are being penalised.’

One source at a Big Six supplier said companies could refuse to pay towards the £50million shortfall.

‘Ultimately, sensible suppliers simply won’t stump up for the mistakes of others.’

A spokesman for Ofgem said: ‘Suppliers that have not met their obligations are in breach of the Renewables Obligation Orders and Ofgem stands ready to take action as needed to secure good outcomes for consumers.’