HHouseholds tempted by the promise of low prices if they turn to an unknown supplier of gas and electricity have been warned not to accumulate large credit balances, in light of the collapse of GB Energy.
Last weekend, the company, which had 160,000 customers, became the first national energy company to go out of business since 2008. Blaming its failure on a sharp increase in wholesale prices, experts predict it will fail. will not be the last supplier to leave customers behind this winter.
Increasingly, the cheapest price lists on price comparison sites are almost exclusively topped with names few have heard of. Over the past couple of years, there have been a slew of new entrants offering prices significantly lower than those charged by the big names.
Joe Malinowski, who runs the price comparison site TheEnergyShop.com, says the question is not whether others will follow GB Energy, but how many?
âWhen you move to a smaller vendor, do your research and make sure you understand the risks. Stay away from those who accept advance payments. Check your credit balance regularly and request a refund if it becomes too large.
Mark Todd, who runs competing switching site Energyhelpline.com, says no consumer should have credit for more than 20% of their annual consumption, but that’s especially true if they’re affiliated with a small business.
Home energy customers can often have hundreds of pounds of credit at this time of year as they anticipate their bills will be much higher during the winter peak period. âSoaring wholesale costs have left any business that was not a ‘forward buyer’ very vulnerable, especially if we have a cold winter and wholesale prices continue to rise,â says Todd. âIf you’ve built up a big balance, ask for one back – and reduce your direct debits. “
But he adds that customers who have moved to an unknown company don’t need to panic because protections have been put in place by energy regulator Ofgem to come to their aid if a supplier goes bankrupt.
Last month, it announced that it had put in place a safety net to secure customer balances, and within three days of GB’s default, it named Co-operative Energy as its “supplier of last resort.” “. This will see GB Energy’s customers change en masse, and they have been assured that the co-op will honor all credit balances. The company also surprised observers by offering the same pricing conditions as those practiced by GB Energy.
The cost of protecting credit balances will be partly covered by Co-operative Energy, the remainder being covered by Ofgem from a fund made up of a levy distributed among all energy suppliers. If other vendors fail, the same process will kick in, Ofgem said.
Meanwhile, questions remain as to how the change in GB Energy customers will be handled, given that Co-operative Energy has indeed added 75% more customers overnight. Last month Ofgem forced the company to pay Â£ 1.8million in compensation for customer service failures. A new computer system had prevented households from logging into their accounts, submitting meter readings or checking their bills – and complaints poured in.
âThe best that can happen is that things go well,â says Malinowski. âThe worst can’t bear to think. If I were a GB Energy customer, I wouldn’t have my fingers crossed hoping for a miracle. There are cheaper and safer options with other energy providers. It’s time to change. Seriously.”
Big price freeze for winter
British Gas and e.on have become the last of the ‘big six’ energy suppliers to declare that they are freezing standard gas and electricity tariffs this winter.
British Gas says the move will bring peace of mind to more than six million customers, and follows similar action by SSE, which has confirmed it will cap standard household tariffs until April 2017. British Gas said she had “term bought” her energy. had allowed him to make the announcement.
However, MoneySavingExpert Martin Lewis has warned consumers not to be fooled by the claim. âIf you are on the British Gas standard tariff, like all six of the major standard tariffs, you are already paying massively too much. For someone who uses normally, you pay Â£ 1,040 per year.
âIf you’re ready to switch businesses, the savings are Â£ 180 per year with normal use, and much more for many customers with higher bills. And those rates are fixed for one year, so they’re cheaper and you’re stuck with a guarantee that they won’t go up much longer, âhe says.
Independent green supplier Good Energy was the first company to announce a winter price freeze on October 19.