Households face £13m bill for another energy firm failure

HOUSEHOLDS are in line to foot a bill of more than £13m for the collapse of power supplier Spark Energy – fuelling growing anger about alleged unfairness in the market.

Ovo Energy – which took on Spark’s customers after it failed – has asked watchdog Ofgem for £13.1m to help with the costs involved.

It means bill payers will have been forced to cough up £45m for bust suppliers since 2016, amid huge upheaval as the traditional big players lose market share to small, cheap and more financially precarious rivals.

When a small firm goes bust, a competitor steps in to take on its customers and can then ask Ofgem to recoup the costs of doing so from the rest of the industry. Suppliers then typically pass this on through household bills.

The largest costs tend to come from paying back customers who were in credit with the failed supplier. Ovo wants enough money to cover 60pc of the £22m Spark owed to customers when it collapsed in June, leaving 290,000 customers in the lurch.

It marks the fifth claim for funds since Ofgem introduced a safety net in 2016, which meant that customers who had paid bills in advance would be refunded if their supplier collapsed.

The system is hugely controversial because many believe it effectively punishes stronger businesses for rivals’ mistakes. Many of those failed firms were accused of distorting the market by running loss-leading tariffs, and boosting their finances by taking cash from customers in advance.

Doug Stewart, boss of supplier Green Energy, said: “Ofgem has put in a set of rules that encourages reckless behaviour and broken business models. It’s ridiculous.”

At least 17 energy suppliers have failed since 2016, following a rush into the market by suppliers who did not have the financial backing to survive.