Are the energy minnows out of their depth?
Thanks to cheap tariffs and simpler switching, smaller energy firms are taking on the Big Six. But as complaints soar and some new suppliers collapse...
MILLIONS of energy customers who switched to start-up firms to shield themselves from costly bills are now paying the price for their leap of faith.
Small suppliers are crashing out of the market at an alarming rate, with 11 firms going bust since the start of 2018.
Exclusive industry analysis reveals that nine of these firms together owed customers close to £113 million when they collapsed, £26 million of which belonged to customers who had already switched to a new supplier.
Yet despite promises that their cash was protected and would be refunded by their new provider, customers are still waiting for refunds months later.
Meanwhile, Money Mail has been bombarded with tales of appalling service from other small suppliers still in business.
Today, after handing a dossier of dozens of reader complaints to industry watchdog Ofgem, we can reveal the scale of financial havoc and emotional distress caused by decades of loose regulation of the energy market:
COMPLAINTS to the Energy Ombudsman are soaring, with small suppliers now accounting for a quarter of all gripes about firms.
FIRMS on the brink of collapse are clinging on to customers’ credit balances and ignoring requests for refunds.
ExPERTS predict between five and ten more suppliers will cease trading this year.
CuSTOMERS are still waiting to get their money back six months after their energy firm went bust.
SuPPLIERS are sending out nonsensical bills and using heavy-handed debt collecting tactics.
DIRE customer service is driving customers back to the Big Six suppliers and putting people off switching.
WHY ARE MANY SMALL SUPPLIERS GOING BUST?
A QuARTER of all households now get their gas and electricity from a small or mediumsized energy company, many of them enticed by a flood of cheap deals on comparison websites that could be hundreds of pounds cheaper than those offered by the Big Six suppliers.
Even today, the 20 cheapest deals available are all with little-known names such as Outfox The Market, utility Point, Lumo Energy, Powershop and Avro Energy.
Despite the loss of 11 suppliers, there are still more than 60 providers to choose from.
But Mark Todd, co-founder of switching service Energyhelpline, says: ‘The rising cost of wholesale gas and electricity, the ease with which suppliers were able to get licences and intense competition will cause between five and ten more suppliers to go bust this year.’
In the wake of increasing chaos in the energy sector, Ofgem last week announced a shake up to its rules for start-up suppliers.
From June, new energy suppliers entering the market will have to pass tougher checks before they are granted a licence.
Incredibly, new entrants can buy a so- called ‘ supplier in a box’ package from an IT provider — giving them all the tools they need to begin supplying energy, including a licence.
Acting like middle men, the firms sign up customers and buy the gas and electricity they need from the wholesale markets.
When the price of wholesale gas and electricity rose sharply last year, it hit some firms hard.
Some small suppliers buy power on a short-term basis, rather than buying it years in advance. If prices rise suddenly, but firms have offered their customers low, fixed tariffs for two years, they may struggle to make enough money to pay for power and go bust.
According to analysis of collapsed suppliers by one industry insider, one tell-tale sign a provider is in trouble is increased complaints about large credit balances building up on customer accounts, and long delays in refunding the cash.
THREATENING DEBT LETTERS
PATRICIA LOW, 79, from Suffolk, has been waiting for a £147 refund since October.
Patricia used to be a customer of Extra Energy before she switched to Green Network Energy for a new deal. She received her final bill stating she was in credit.
When the money did not turn up, she tried to call the company, but was unable to get through. The company had gone bust.
In December, Scottish Power took over Extra Energy’s 108,000 domestic customers and promised to refund any credit balances, but Patricia is still waiting.
The retired reporter for the Lowestoft Journal says: ‘When I saw they owed me money, I thought, “Oh good I can buy Christmas presents with that.” But it’s April now and I still haven’t received anything.’
At the time of Extra Energy’s collapse in November, the Energy Ombudsman had received 1,160 complaints about the company over the previous 12 months. It says its caseload is still growing.
Complaints website Resolver says it is also receiving around 50 letters and emails a week about the firm’s debt collecting practices, being carried out by administrator PriceWaterhouseCooper (PWC).
Hundreds of former account holders and members of the public who had never been customers feared they had been targeted by fraudsters when they received debt collecting letters from PWC.
Angry recipients wrote to Money Mail explaining they didn’t owe any money to the firm.
A PWC spokesman confirmed the letters were genuine. It adds that it is aware of a limited number of instances where people have already paid or dispute the outstanding amount and apologised for the confusion.
Scottish Power says it realises it has taken too long to issue final bills and return customers’ credit balances and has apologised.
STILL WAITING FOR £500 BACK
BRIAN and Vivienne Clarke, from Somerset, are still waiting to get £500 back from Economy Energy after it collapsed in January.
Ovo Energy was appointed to take over Economy Energy’s 235,000 customers and has promised to refund any credit owed to all affected.
Yet since the Clarkes’ account was moved to Ovo, Economy
nergy has taken a further two 146 monthly payments. Then, when Brian received his rst bill from Ovo this month, it aid his monthly payments would ncrease to £188 and failed to show he £500 credit he had built up or ny of the two monthly payments e had made since Economy nergy stopped trading. He’s been told Economy Energy must send a final bill to Ovo before e will see his money again. The 76-year- old retired coach river says: ‘The system does not ork. The regulator tells you not to worry, you will be transferred to new supplier and your money is afe. But once they have chosen he new supplier, they do not make sure the process is working properly. You are just told to sit ght and wait.’ When the firm collapsed, the nergy Ombudsman was investiating 1,300 cases of dissatisfaction — one of the highest monthly complaint levels it has seen outside he Big Six suppliers. Former pilot Geoffrey Dryland nd his wife Gillian, a retired eacher, both 74, are waiting for Ovo o refund a £460 credit which they ad built up with Economy Energy. Geoffrey, from Staffordshire, who ad a stroke last April, says his xperience with both suppliers om start to finish has been very upsetting. ‘ This whole situation has made me so upset. I have lost all that money.’
Since Money Mail contacted Ovo, it has agreed to refund the couple.
A spokesman for Ovo says it is committed to honouring all credit balances. Economy Energy customers should start receiving final bills in the next few weeks.
RETURNING TO THE BIG SIX
GILLIAN GUY, chief executive of charity Citizens Advice, says long waiting times for refunds, difficulty switching and debt chasing practices when firms fail have prompted a large number of calls from the public.
Regulator Ofgem admits that in some cases it is taking longer than expected for new suppliers to refund customers because of delays caused by poor record-keeping by the failed supplier.
However, it expects the new supplier to work hard to manage the transfer and be ready to deal with any issues that emerge.
Frustrated readers have also told Money Mail how they are battling to get their cash back from small suppliers that are still taking on new customers.
Some are so fed up, they are starting to desert the minnows for the so- called Big Six suppliers: British Gas, Eon, EDF Energy, Npower, Scottish Power and SSE.
While the number of people switching energy suppliers has increased in general, 59,134 customers ditched small and medium-sized companies for a Big Six firm in February, up from 45,383 the previous month, figures from Energy UK show.
Martyn James, of complaints site Resolver, says: ‘One of the great tragedies that has come from the spectacularly awful customer service from some smaller energy providers is it could be putting people off switching.’
Peter Coombes, 76, from Bournemouth, says he will never switch to a small supplier again. In October 2017, he moved to Toto Energy when a comparison site told him he could save £288 a year on his combined gas and electricity bill.
Almost straight away, the company upped his combined payments from £93 to £140 a month.
Peter sent in his readings every few months, but was frequently told, via an automated email, that his account could not be found.
Peter decided to switch to large supplier Eon. When he received his final bill in November, he found he was £382 in credit and was told he would receive it in 28 days.
Having heard nothing from the firm by January, he contacted the Ombudsman and finally, in March, Toto agreed to give him his money back and £30 for his troubles.
He received £412.44 in total and closed his account, but forgot to cancel his direct debit. A week later, Toto took the £412.44 back.
Peter says: ‘I called them, gave them a piece of my mind, and they gave me my money back two days later. I would never switch to a small supplier again.’
A Toto spokesman says: ‘We are in close contact with the Ombudsman and in our most recent meeting they noted that the rise in complaints had been reversed.’
NEW RULES FOR BETTER SERVICE
UNDER Ofgem’s new rules, firms will have to prove they can provide good customer service. This includes accurate billing and an efficient phone and email service.
Last year, nearly two-thirds of all complaints received about small suppliers related to billing, according to the Energy Ombudsman.
Switching complaints accounted for 12 pc of complaints, customer service 9 pc and payments and debt 6 pc.
THERE has been no greater champion of the liberalisation of the energy market than Money Mail.
For decades, we have campaigned to break the stranglehold of the Big Six suppliers and boost competition so customers can get a better deal.
Time and again, we have reported how readers can save hundreds of pounds a year by giving lesserknown firms a chance.
Today, it may be time to concede that the race to compete on price is having some negative consequences.
As we report on Pages 40 and 45, many customers are at their wits’ end after fighting for months to get their money back from small firms that have gone bust.
This section has spent years trying to cajole households into shopping around, but now I fear customers will become so frustrated they’ll give up on switching altogether. This would be a devastating outcome, as staying with the same supplier year after year means you could miss out on enormous savings.
It would be unfair to tar all small suppliers with the same brush. Many do a brilliant job, and without them forcing behemoths such as British Gas to compete for your custom, bills could sky-rocket.
So what should you do? Well, I switch energy provider every year and I admit that, up until now, I have been pretty cavalier when it comes to choosing supplier. My mantra was: ‘Cheapest is best.’ Now, I’ll be paying far more attention to how a firm’s customer service is ranked by Citizens Advice. This is vital because high numbers of complaints and problems getting credit balances refunded are tell-tale signs that a supplier may be in trouble.
Watchdog Ofgem has promised to push up service standards and force new firms to pass stricter checks before they are allowed to take on customers. But it needs to move swiftly, before nervous households are driven back to the pricey Big Six suppliers.
Sharks tanked
IT IS a relief to learn that a gang of cold-calling sharks who conned elderly victims out of £425,000 in just five months are now off the streets — for a while, at least.
The four scammers, who called themselves the ‘Wolves of Wind Street’, were jailed on Monday for conspiring to defraud, in their own, charming words, ‘pensionrich suckers’.
As Money Mail reported recently, the group had promised victims new boilers in return for an upfront fee of £299 or £399 under a government scheme that did not exist.
The gang, who chose their nickname because they spent much of their ill-gotten gains wining and dining in the notorious Wind Street nightclub area of Swansea, South Wales, were stopped only after local trading standards intervened.
The trio of company directors were each jailed for three years and nine months. A fourth member of staff was sentenced to 18 months. If it were up to me, I’d throw away the key.
In praise of AXA
HERE at Money Mail, we regularly hear from readers who feel let down by insurers. So it makes a nice change to print a positive tale.
Tony, from Dawlish, South Devon, says his travel insurer, AXA, went above and beyond the call of duty when his wife fell ill in India.
Following a stay in Agra, home to the Taj Mahal, the couple came down with food poisoning. Tony recovered, but his wife had to spend six days in hospital.
He writes: ‘ AXA covered all hospital and extra accommodation costs and took control of the situation, which was a relief. It also paid for first- class flights home and flew in caring Dr Singh Satvender to provide medical supervision on the journey home.’
Well done AXA!