Ofgem is still owed £7m by string of collapsed power companies

‘The longer-term solution to this issue is a more financially resilient energy sector’

‘We work hard to ensure funds owed by failed suppliers are robustly pursued’

THE energy regulator is still owed almost £7m by a number of collapsed suppliers, according to data that raises fresh questions about whether the costs are unfairly falling on consumers.

Ofgem has collected about £3.7m out of £10.4m it claimed was owed by four companies which went under before the pandemic, figures reveal.

According to figures published last week, Ofgem has collected £3.5m out of £7.1m owed by GB Energy, which collapsed in 2016, and £1,362 out of £185,390 owed by Usio when it failed two years later.

It also collected £75,145 out of £1,328,180 owed by Gnergy after it went bust in 2020, and £217,551 out of £1,810,778 owed by Brilliant Energy following its 2019 collapse.

The payments were due under an industry-wide scheme which is designed to support the growth of renewable energy, known as Renewables Obligation (RO).

Suppliers have to make annual payments at a level depending on how much renewable electricity they buy, but the companies had not made the payments when they collapsed.

It means that Ofgem is left to collect the payments from administrators, a long and complex process with other creditors also in the queue.

RO debts left behind by failed suppliers affect the entire industry as Ofgem can charge remaining suppliers for the shortfall if it hits a certain threshold – meaning costs are ultimately borne by their customers through higher bills.

The funds so far recovered by Ofgem from the failed suppliers’ administrators have been passed on to the rest of the industry to cover these mutualisation costs.

Ofgem said: “As energy regulator, protecting consumers is always our top priority.

“We work hard to ensure funds owed by failed suppliers for their Renewables Obligation are robustly pursued and recovered wherever feasibly possible.

“It’s crucial to note that the amount of funds we can recover from a supplier if they are in administration is determined by the administrator themselves as often cost recovery is shared between many parties – not just Ofgem.”

Dozens more energy suppliers failed in late 2021 following a sharp rise in wholesale gas prices.

The string of collapses led to criticism that regulation was too weak, allowing companies with too little financial backing or expertise to enter the market.

MPS on the public accounts committee issued a scathing report in November accusing Ofgem of letting households down – and warning that the collapse of 29 suppliers since July 2021 had added £94 to energy bills,

The committee said: “Its failure to effectively regulate the energy supplier sector has come at a considerable cost to billpayers. Ofgem must urgently learn lessons to protect customers and prevent them from having to foot the bill in the event of any future failures.”

Ofgem said that it had submitted claims to administrators for sums owed by those companies but warned that recovering the money could take years.

It added: “The longer-term solution to this issue is a more financially resilient energy sector where suppliers are less likely to go bust in the first place as we move towards a cheaper, cleaner, homegrown energy system.

“That is precisely what Ofgem is creating via the robust changes we have and are introducing.”