Ofgem may be looking to block the suppliers that go bust from selling their customers to rival suppliers.
Since January 2018, fourteen energy suppliers have collapsed with a further nine predicted to follow over the next six months. During these collapses more secure suppliers have been picking up the remnants of over a dozen energy suppliers who have gone under, most recently we’ve seen Solarplicity sell to Toto Energy and EDF ahead of them going bust.
Ofgem is concerned that some suppliers may be ‘cherry-picking’ the more profitable customers and switching them onto more expensive deals, as well as leaving the industry to take on the costs for the struggling companies. Ofgem is contemplating whether they should be vetoing this sort of transactions going forward as it may distort the supplier-of-last resort-process they have in place to follow after a supplier goes bust rather than before.
Over the last few years, there has been a boom in new suppliers joining the market with low margins which have driven many suppliers to run on small margins. This has, coupled with inexperience in the market, has left them vulnerable to small fluctuations in the cost of wholesale energy and third party costs. In addition, with Ofgem clamping down on energy suppliers with poor practices, putting freezes on acquisitions and even fining them in some instance, staying afloat as a supplier has become much harder than it used to be.
Mary Starks, the head of consumers and markets at Ofgem told the Sunday Times that Ofgem will take “robust action” against sales that fail to protect customers and that “We are … considering whether … there is a case for strengthening our powers to veto such transactions.”
Ofgem will be consulting over the next few months to decide on whether a veto should be introduced. So stay tuned for more details and if you have any questions in the meantime please give me a call on 024 7669 8885.