Energy firms go bust
Don’t fret if your supplier fails, but be ready to get a cheaper deal
Energy prices in Britain are soaring. Wholesale electricity prices are at record levels, and gas prices have hit multi-year highs (see page 14). One consequence of this has been a wave of bankruptcies among smaller energy suppliers. Seven firms have already ceased trading this year and more could follow. The most recent failures are Utility Point and People’s Energy, who had half a million customers between them when they went out of business last week.
The good news is that if this happens to your energy supplier, it shouldn’t have any direct impact on you. Ofgem, the industry regulator, will switch you to a “supplier of last resort”. Your electricity and gas will continue to be supplied in the meantime and any credit that you had with the old supplier will be transferred to the new one. Ofgem usually finds customers another provider within 14 days of an energy firm ceasing trading. It has already appointed British Gas to take on customers from People’s Energy, while those currently with Utility Point will go to EDF.
You shouldn’t try to switch to a different provider while the transfer process is taking place, but take meter readings now to give to the new supplier when it contacts you. The tariff that you had with your old supplier will end and the new supplier will put you on a special “deemed” tariff – often its standard variable tariff (SVT). However, this may not be the best deal available, so once the firm gets in contact, ask what its cheapest tariff is – and shop around to see if you can do better elsewhere. You can transfer to a new provider without exit fees.
Fix prices for more certainty
The increase in wholesale costs is putting pressure on suppliers to raise their prices, and on the government to increase the energy price cap (the most providers can charge on SVTs). Ofgem has raised the price cap for a typical household by £139 to £1,277 with effect from 1 October. This increase was decided in August, before the recent wholesale spike. So the next six-monthly review – which will be announced in February and take effect in April – could well see the cap rise again.
Fixed-term deals are the best way to protect yourself from future increases, says The Daily Telegraph. Locking in a one- or two-year fixed rate is optimal even if the savings are minimal for now, because of the likelihood that the cap will rise over the next year. SVTs around the level of the cap may look attractive at present, but there is a danger that anybody on one could see another substantial increase next year, says Lisa Barber of Which?. So it’s prudent to consider switching now while there are still some competitive fixed-rate deals.
Energy firms are pulling many cheaper tariffs from the market: there are just nine tariffs from four providers available on comparison site GoCompare, an 89% decrease on normal levels. However, better deals can still be found on some providers’ own websites. For example, Sainsbury’s Energy, which is operated by E.on Next, offers a one-year fixed deal for £1,177 a year for a typical household, which is £100 less than the cap, and a two-year fixed deal for £50 less, says Martin Lewis of MoneySavingExpert.
“If the cap rises again… these deals will look even more appealing.”
“You shouldn’t try to switch provider while the transfer process is taking place”