The energy market is currently facing challenging times with wholesale energy prices rising. As suppliers are restricted by Ofgem’s price cap on energy bills, many of them are struggling to pay commodity prices. In turn, some suppliers have no choice but to go out of business.
Just a few days ago, on 7 September 2021, two UK energy suppliers announced that they are going to stop trading. The news concerns PfP Energy and MoneyPlus Energy. The former has around 80,000 domestic customers and 5,000 business customers, and the latter around 9,000 domestic customers.
When announcing the decision, a spokesperson for PFP Energy said: ‘It is with regret that we must announce that PfP Energy is ceasing to trade.’
A MoneyPlus Energy spokesperson added: ‘MoneyPlus Energy has exited the energy supply market. We appreciate that this could be unsettling, however, Ofgem, has in place a safety net which is aimed at helping and protecting customers during this period.’
What happens to customers of suppliers that cease to trade?
If you are a former client of either PfP Energy or MoneyPlus Energy you are probably starting to panic. Nevertheless, you should try not to stress. Ofgem has developed a safety net for customers who find themselves in such a situation. After all, none of it is their fault! Ofgem’s safeguards are intended for all energy customers in the UK.
Thanks to Ofgem’s help, the energy supply of these customers will continue and any outstanding credit balance will be given back to them so they don’t have to worry about losing money. Ofgem will also choose a new supplier for the customers and inform them about who their new energy provider is. Of course, if you are not happy with Ofgem’s choice, you have the right to switch to a different one. Nevertheless, you should wait for Ofgem to appoint one first to make sure that your energy supply is not disrupted. When the new supplier contacts you, provide them with a meter reader. Thanks to that, you will be paid back any outstanding amount.
Ofgem is completely impartial so you can be sure that the supplier it chooses is reliable. Moreover, Ofgem’s main task is to make sure that customers are being charged fair energy prices. That said, you don’t have to worry about your new supplier being overly expensive. In terms of energy bills, you will probably keep paying what you have been paying to MoneyPlus Energy or PfP. Or, you might even get lucky and cut your energy bills thanks to switching!
To calm the nerves of worried customers, Neil Lawrence, who became a Director of Retail at Ofgem earlier this year, said:
‘Although the news that a supplier going out of business can be unsettling, PFP Energy and MoneyPlus Energy customers do not need to worry. Under our safety net we’ll make sure your energy supplies continue. If you are a domestic customer with credit on your PFP or MoneyPlus account this is protected and you will not lose the money that is owed to you.
Ofgem will choose a new supplier for you and while we are doing this our advice is to wait until we appoint a new supplier and do not switch in the meantime. You can rely on your energy supply as normal. We will update you when we have chosen a new supplier, who will then get in touch about your new tariff.’
What is Ofgem?
Ofgem is the UK’s independent energy regulator and an official government department for both gas and electricity supplies. It protects the rights of energy consumers and ensures that energy suppliers treat them in a fair manner. Thanks to Ofgem, even if a supplier has a monopoly in a certain region, it cannot set too expensive prices. Ofgem also promotes competition on the energy market and it investigates complaints against suppliers.
Ofgem’s responsibilities include:
- Promoting value for money on the energy market
- Ensuring that there is enough electricity and gas available to meet consumers’ demand
- Promoting sustainability and energy efficiency
- Developing and delivering environmental programmes.
Ofgem has many powers and can take three types of enforcement action:
| Licence conditions | If Ofgem determines that an energy company has breached the Gas Act 1986 or the Electricity Act 1989, it can impose financial penalties on them. |
| Competition law | If an energy provider breaches the Competition Act 1998 and Articles 101 and 102 or the Treaty on the Functioning of the European Union, Ofgem can issue directions and penalties. |
| Consumer protection law | Ofgem can issue an order to make an energy company stop breaching consumer legislation. |
Why are energy suppliers going bust?
As yet another energy suppliers have gone bust, you might be wondering why that happens. The main reason why suppliers stop to trade is the high wholesale energy prices. This year there has been an unprecedented number of price rises. Suppliers regularly update their prices to keep up with the changing wholesale energy prices but, as Ofgem prevents them from setting the prices too high, sometimes that is not enough. In turn, many energy companies find themselves unprofitable and cannot survive.
That was the case with PfP Energy and MoneyPlus Energy. As smaller suppliers, these companies were particularly vulnerable to the surge in wholesale energy prices. For the last few months they have been selling energy to customers at lower prices that they had to pay in the market.
Bloomberg reported that ‘Benchmark gas prices in the U.K. surged to a record Tuesday amid a wave of higher prices sweeping across Europe due to a lack of supply.’ Bloomberg further reports that now power prices in the UK are more than double the average from the last five years.
Will more suppliers go bust?
Since 2018, more than 20 UK suppliers have ceased trading. ‘In 2020 alone the likes of Yorkshire Energy, Tonik Energy, Effortless Energy and GnERGY shuttered, meanwhile this year Hub Energy, Green Network Energy and Simplicity Energy have gone under.’, Current News reported.
The record-high wholesale energy prices pose a challenge to many of the UK suppliers. On top of that, the winter is approaching and some worry about gas shortages. With all these obstacles, there certainly is a risk that more suppliers will go bust. Still, there is no way to predict that and the next few months will show how the situation evolves.
Has your energy supplier gone bust? Do not worry, there are still tens of other electricity and gas suppliers operating in the UK and you have the freedom to choose the one whose tariffs you like the most.
Is it a good idea to switch to a smaller supplier?
Many people wrongly assume that the biggest, the most popular energy suppliers are the best. In reality, however, many smaller suppliers offer more competitive rates and more flexible contracts. While it is true that smaller suppliers are more vulnerable to the changes to wholesale energy prices, suppliers going bust is not a frequent occurrence so you should not worry. You should not pick a Big Six supplier just because there is little risk that they will stop trading. Instead, do an energy price comparison and pick a provider that offers the cheapest rates and the best quality.
How to get more information
If you would like to find out more about why energy suppliers go bust and what to do if that happens to you, get in touch with us. You can call us on 0131 610 8868 or send us an email at info@niccolo.co.uk. We will answer all your questions and explain more about your options. We would like to replace your old supplier and offer you a competitive and flexible contract.
Moreover, if you enjoyed this story and you want to find out more news from the energy industry, check Niccolo’s Blog regularly.
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