What to do if your energy company goes bust — as Avro Energy and Green collapse
With the UK energy crisis continuing, and wholesale prices surging, a string of smaller gas and electricity companies have gone bust in recent weeks — and there are fears more could follow suit.
Gas costs are rocketing due to a combination of factors, including low gas reserves, strong commodity and carbon prices, heightened global demand, and low wind output.
As wholesale prices are currently so much higher than the price cap, providers are supplying energy below cost — smaller firms don’t have the reserves to absorb such costs.
But while there are fears that hundreds of thousands of consumers could find themselves left in limbo if their provider goes out of business, the key message is not to panic, as there is a safety net in place.
Which firms have collapsed?
Avro Energy and Green are two of the latest firms to exit the market. Avro is the largest supplier to ever go bust and, combined with the failure of Green, almost a million customers will be affected.
Around 1.5 million people have been hit by supplier failures in the past six weeks.
Read more: Gas price crisis: Millions of consumers hit as energy firms collapse
Justina Miltienyte, energy policy expert at comparison site, Uswitch.com, said: “This is a double blow for the energy industry and will cause further worry for consumers. Soaring wholesale prices are making conditions difficult for all suppliers, but challenger brands in particular are struggling to make ends meet.”
People’s Energy, Utility Point, PFP, MoneyPlus, and Hub Energy are also among the list of companies which have recently stopped trading. And there is mounting speculation that unless the price of wholesale gas goes down, more firms could go the same way.
What options you have
While you may feel nervous if you’re the customer of one of the firms that has collapsed, there is a safety net, as energy regulator, Ofgem, steps in to protect customers.
If a provider fails, the industry’s "Supplier of Last Resort" kicks in, and Ofgem carries out a process of choosing a new provider to "rescue" the business, while the old supplier is taken over by administrators.
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Energy customers can be reassured their supply won’t be cut off.
Gillian Cooper, head of energy policy for Citizens Advice said: “These latest failures will add to people’s worries at what’s already an extremely unsettling time, but there are protections in place. They won’t lose their supply, their credit balances are protected — and the price cap limits the cost of bills.”
A new supplier will be appointed
When a firm ceases trading, Ofgem puts the case out to tender, and other firms compete to offer the best deal.
For example, Utility Point customers have been informed that EDF will be taking over their supply, while British Gas will be taking over People’s Energy customers.
What do I need to do
As a priority, you should take a meter reading in preparation for when the new provider gets in touch.
This will help make the transition as smooth as possible and ensure your new bills will be accurate.
If you pay by direct debit, don’t cancel it. Your new supplier will explain what’s going to happen regarding future payment.
Should I switch?
No. Not right away. Wait until your account has been transferred, and you’ve been contacted by the new provider chosen by Ofgem.
That way, you will be able to look at the terms of the new tariff you’re being offered.
Read more: 'Hundreds of thousands of consumers' could be hit by UK gas price rises
The key is to look at the details, and see how this compares to what else is currently available. You can then decide whether to shop around for a better deal. A good starting point is a comparison site such as MoneySuperMarket.com, Uswitch.com or EnergyHelpline.com.
Be warned though, due to the current crisis, there is currently less competition in the market, and few cheap fixed-rate deals available. That said, it’s still worth looking.
If you do decide to switch, you won’t be charged exit fees for leaving.