Energy regulator Ofgem has floated plans to make bill-payers pick up some of the costs of failing energy suppliers.
According to Emily Gosden at the Telegraph, the regulator is seeking a means of protecting customers in credit with energy companies in the event of their running into financial difficulties:
“The energy regulator has been reviewing procedures to cope with a supplier going out of business as an influx of new start-ups join the market offering cheap gas and electricity deals that some fear may prove to be unsustainable.”
Customers who pay for electricity on direct debit are often obliged to pay in advance. Moreover, bills evened across the year can leave customers hundreds of pounds in credit. In the event of a supplier going bust, this money could be lost.
As Britain shifts away from a centralised energy sector dominated by a small number of big players, the risk of companies failing will increase significantly. This risk will increase as energy prices increase in future.
To provide protection against this, Ofgem are proposing to spread the cost between customers of other energy suppliers. However, Gosden spots the obvious unfairness in the proposal:
“The plans raise the prospect that those customers who have benefited from the cheaper prices offered by an unsustainable start-up may then be bailed out by those who have already been paying higher prices with a more established supplier.”
In the end, companies may have to shoulder the risk rather than passing it on to an already hard-pressed public.