Ofgem faces switching scrutiny
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”.