Ofgem faces switch­ing scru­tiny

The Sunday Telegraph - Money & Business - - Business - By Jil­lian Am­brose

THE en­ergy reg­u­la­tor’s lat­est mar­ket tin­ker­ing may have un­wit­tingly handed thou­sands of cus­tomers to an en­ergy com­pany on the brink of go­ing bust, The Sun­day Tele­graph can re­veal.

Ofgem’s trial of a new scheme to en­cour­age cus­tomer switch­ing is ex­pected to end in calamity af­ter al­most 13,000 cus­tomers on the worst value en­ergy tar­iffs were urged to leave their sup­plier for a start-up firm which is un­able to pay its bills.

Un­der the new scheme, Big Six sup­pli­ers were forced to con­tact hun­dreds of thou­sands of cus­tomers to of­fer three al­ter­na­tives tai­lored to their en­ergy use, of which two were with new sup­pli­ers. A let­ter from SSE to a 97-year-old man liv­ing near South­hamp­ton, seen by The Tele­graph, urged him to switch to Elec­traphase last month. Just weeks later, the com­pany is on the brink of col­lapse.

SSE sent over 176,000 let­ters to cus­tomers, of which 12,917 cus­tomers were urged to switch to Elec­traphase. The en­ergy min­now last week hired ad­min­is­tra­tors in “an im­plicit ad­mis­sion” that it “is un­able to pay its debts”, ac­cord­ing to the elec­tric­ity mar­ket op­er­a­tor. Elec­traphase is still trad­ing, but could not be reached for com­ment.

In to­tal, around 500,000 let­ters were sent by the five largest en­ergy sup­pli­ers to rec­om­mend al­ter­na­tive tar­iffs. It is not known whether other sup­pli­ers in­volved with the trial may have sug­gested Elec­traphase too. The tar­iff choice is based al­most en­tirely on price, with no re­gard for cus­tomer ser­vice or fi­nan­cial sta­bil­ity.

The is­sue has reignited calls within the in­dus­try for Ofgem to crack down on the huge num­ber of small un­der­funded en­ergy firms that have flooded the mar­ket with rock-bot­tom deals, which prove un­sus­tain­able when mar­ket prices abruptly rise.

Lawrence Slade, chief ex­ec­u­tive of En­ergy UK, called on the reg­u­la­tor for ac­tion, say­ing “much more rigour is needed”.

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