EXPOSED: Murky dealings that led to collapse of Economy Energy
Power firm is being sued by National Grid for £12m over smart meters Damning document reveals boss failed to disclose links to rival firm
COLLAPSED power firm Economy Energy is being sued for millions of pounds by three companies including National Grid, The Mail on Sunday can reveal.
An investigation by this newspaper found that the firm’s boss, Lubna Khilji, 33, was embroiled in a series of disputes before the firm ceased trading last week.
In one case, National Grid claims the company owes it £12 million for supplying smart meters.
Two other smart meter installation businesses, Access Install and Green Deal Marketing Southern, took Economy Energy to court in 2017 and 2018 over unpaid bills.
The company is understood to be contesting the cases.
Economy Energy, whose 235,000 customers have now been taken on by Ovo, had made a last-ditch bid to survive last month when it hired City powerhouse KPMG to help raise £5 million.
Khilji – who bought her home in Kenilworth, Warwickshire, with £ 964,000 in cash two years ago, according to Land Registry information – was reported to have offered to put up £5 million of her own money as well.
But The Mail on Sunday can reveal that documents given out to potential investors failed to mention the outstanding court cases.
They also claimed that she owned ‘100 per cent’ of the company – a statement backed up by its latest published accounts. However, other records on Companies House suggest that Paul Cooke, who also owns rival firm E Energy jointly with Khilji, was also a shareholder of Economy at that time.
Last night, lawyers for Cooke said Economy’s shares were wholly owned by Khilji when the company collapsed. Companies owned by Cooke, 50, and Khilji have been under investigation since 2016 by the regulator Ofgem for alleged collusion. The pair appear to have spent the past few months altering the ownership structures of a web of energy firms they control.
On December 21, Khilji stepped down as a director of three other energy companies, which all have licences to supply gas and electricity to homes.
She was replaced by Cooke. On the same day, ownership of Vavu Power, Albuquerque Energy and Santana Energy transferred from Economy Energy to E Energy.
The registered address also changed from Economy Energy’s office in Coventry, where Khilji was spotted by The Mail on Sunday last week, to E’s Birmingham headquarters. Industry experts said these brands could now be used to attract new customers.
The revelations will heap pressure on regulator Ofgem to tighten up the rules for individuals who try to set up energy firms in Britain.
Over the past year, nine suppliers have gone bust, yet the owners have walked away from any money owed to customers or in taxes. That has left a bill of about £100 million for other suppliers.
Last night, one senior industry source said of Economy Energy’s dealings: ‘In all my years in the industry I have never seen anything like this. Economy’s behaviour is outrageous and completely unprecedented. How they got away with this is mind-boggling.’
Signs t hat Economy Energy, which was launched in 2012 by Khilji, was under strain emerged when it extended its accounting period in November last year.
The fund-raising document, seen by The Mail on Sunday, states that losses had hit £5.7 million for the seven months to October.
It also states that the company lost 100,000 customers in 2018. Some consumers have alleged that they have waited months to be repaid the credit they had on their accounts. Citizens Advice said it had received a large number of customer service complaints about Economy Energy.
The KPMG document, named Project Wattley, said: ‘The direct debit market has proved difficult and the inherent billing issues with this customer base have put a recent strain on Economy Energy’s profitability and resource.’
The document failed to disclose that the company owed £15.5 million in unpaid green taxes or Khilji’s shareholding in rival E Energy. It also failed to state how much was owed to customers in credit. Multiple sources said the company still owed millions of pounds to customers when it went bust.
KPMG declined to comment. A source close to the accountancy giant said all the information in the document was provided by Economy Energy and KPMG was not required to check it.
The document was understood to be an ‘information memorandum’, which, unlike a prospectus issued on the stock market, is not required to provide full disclosure to potential investors.
The source said the attempts to raise funds were halted before any investors put in money. National Grid, Access Install and Green Deal Marketing Southern declined to comment on the ongoing court cases.
According to court documents for the National Grid case, Economy Energy ordered nearly 300,000 smart meters from the company in 2016 and 2017 for delivery last year.
The paperwork alleges that Economy failed to pay the £12 million bill – despite National Grid’s four letters between December 2017 and June 2018 asking for payment.
The case against Economy brought by Green Deal Marketing Southern also lists E (Electricity and Gas) Limited, Paul Cooke and Lubna Khilji as defendants.
Gillian Guy, chief executive of Citizens Advice, said: ‘Economy Energy has been failing its customers for years.
‘We have seen extensive problems with this firm and raised numerous concerns with the regulator... there are still firms operating now that require the regulator’s attention.’
Ofgem launched its first probe into Economy Energy in 2016, accusing it of breaching competition law by agreeing with E Energy to avoid competing for the same pre-payment customers.
Two further investigations into Economy were launched last year into unpaid green taxes and poor customer service. The latter led to Economy being banned from taking on new customers.
Ofgem says it is reviewing its licensing rules for suppliers.
Khilji declined to comment. A lawyer representing Cooke said his client did not have enough time to provide a full response but stressed that Economy’s collapse was due to tough trading conditions and the company seeking to protect its interests in court.
He added that the interests of Economy’s customers were of ‘paramount importance’ to the directors, who will assist administrators and Ofgem.