What Should I Do If My Energy Supplier Goes Bust?
You can continue to use gas and electricity even if your energy supplier goes bust. Ofgem will allocate you a new supplier and your account will be transferred. Read on to find out what will happen and what you need to do.
With several energy suppliers recently going bust, including People’s Energy and Utility Point, and more suppliers expected to go the same way, many households could be left without an energy supplier.
While this could understandably cause concern, it’s reassuring to know that you will still have a gas and electricity supply. You will be able to use energy as normal until you are allocated a new energy supplier, so there is no need to worry about your energy supply being cut off.
What do I need to do?
If you are notified that your energy supplier has gone bust and will no longer be providing you with energy, you don’t need to do anything to continue using gas and electricity as Ofgem will automatically move you to a ‘supplier of last resort’. Your energy supply won’t be affected, so you can continue to use it as normal.
While you wait for a new energy supplier, it is a good idea to take a meter reading to ensure your new supplier has accurate and up-to-date information about your energy use. It may also be worth digging out your most recent bills to show your payment history. You can check your account balance as well, to see how much you are in credit or how much you owe the company.
Any credit you have will be protected and transferred to your new supplier. If you owed money to your previous supplier, you will need to pay this back to the company’s administrators or your new supplier.
If you paid by direct debit, you can cancel this if you wish, as you can set up a new direct debit with your new supplier. However, it’s not essential as your existing direct debit may transfer to your new supplier.
Other than this, you don’t need to do anything until you hear from your new supplier. Don’t try to switch before your account is transferred to your new supplier, as it could delay proceedings and make it more difficult to claim back any money you are owed.
When will I get a new supplier?
Ofgem, the energy regulator, will appoint all affected households with a new supplier. Ideally, this should only take a few days, but it could take longer. Once a new supplier has been appointed, it will contact you with further details about your new tariff, how to set up your payments, and what will happen to your existing account balance.
The supplier will also work out how much you owe for the energy you used before it took over your account, and may deduct this from your account balance.
You won’t be able to remain on the same tariff you had with your previous supplier. Instead, you will automatically be switched to the new supplier’s ‘deemed tariff’ which is typically more expensive than standard tariffs. This is because the energy supplier is likely to face extra costs and risk by taking on an old supplier’s customers at short notice.
You will stay on this deemed tariff until you choose one of the supplier’s other tariffs or switch to a different supplier. If you decide to switch, you won’t need to pay any exit fees.
If you are not sure which company is your new energy supplier, you can check this list on Citizens Advice.
What if I owed money to my previous energy supplier?
If you were in debt to your previous energy supplier, this may be carried over to your new energy supplier. As part of the agreement, the new energy supplier may take on all customer debts and will contact you with more information on how to repay the money you owe.
However, the energy supplier may not agree to take on customer debts. If this happens, you would still owe money to your previous supplier’s administrators and need to pay it back. The administrators would contact you to arrange a repayment plan.
What if I was on a prepayment meter?
While you wait for your new supplier to be decided, you should top up as before so you continue to get your energy supply. However, it may be worth only topping up a small amount, so you don’t have lots of excess credit when your account is transferred. This credit may not be available to use with your new supplier, and any refunds may take a while to process.
When your new supplier gets in touch with you, it will give you more details about how your prepayment tariff will work.
Remember, you don’t need to stay with the supplier you’ve been allocated. You can choose to switch to a different energy firm if you prefer, without facing any penalty charges.
Why are so many energy suppliers struggling?
Energy suppliers are facing record high wholesale gas prices and rising electricity prices, which means they need to pay more for energy. Oil & Gas UK, an offshore oil and gas industry group, says wholesale gas prices are up 250% from January 2021, and up a massive 70% from August 2021.
There are a number of reasons for these soaring prices, including high demand, gas shortages, and lower than usual output from renewable sources.
Smaller energy suppliers are finding it difficult to cope in this volatile market and with the rocketing wholesale energy costs. Many don’t have the financial cushion that larger suppliers may have to get them through these challenges, and the price cap limits the amount they can pass on to customers.
Although Ofgem’s energy price cap, which sets the maximum amount suppliers can charge customers on default tariffs for their gas and electricity, is rising in October 2021 – this is too little for some providers. With wholesale energy costs rising at such a rapid rate, the price cap hasn’t kept up so suppliers can’t increase the amount they charge customers at the same level that wholesale prices are rising.
Meanwhile, suppliers have agreed to charge customers on fixed tariffs a certain amount for their energy, which means these customers could be paying less for their energy than it costs the suppliers to buy energy. As a result, many energy suppliers could be operating at a loss.
At the time of writing, the government is looking at what it can do to support energy companies and consumers during this period.
Image source: Getty Images
Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more