An independent arbiter for the energy market has said a slew of company failures over the past year means customers are not getting redress for their complaints.
The Energy Ombudsman told City A.M. it is working with regulator Ofgem to find a solution to the problem to “best serve the interests of consumers.” The Ombudsman will also try to deal with a £1m hole in its budget left by bust companies which owed it money.
“If a consumer complains to us about a supplier that subsequently ceases trading, there is no formal mechanism that enables the complaint to be resolved or the consumer to receive redress,” a spokesperson said.
The organisation funds its free service to customers by charging companies a fee for the issues it investigates.
A total of 12 energy suppliers have gone bust since the beginning of 2018, causing Ofgem to last week sharpen its rules for who can enter the market.
Some of the companies saw a sharp increase in the number of customer complaints to the Ombudsman in the weeks leading up to their collapse.
“This naturally increases our financial exposure in terms of unpaid case fees,” the spokesperson said.
Analysis run by City A.M. shows that the Ombudsman has lost around £1m in fees over the course of the year from businesses which failed.
Failed supplier Economy Energy was top of the pile, owing £788,150 to the Ombudsman when it folded in January. Other debtors include Spark Energy, which owed more than £81,000 when it collapsed and Extra Energy, with a bill coming to nearly £72,000.
“We are a not-for-profit organisation but we are subject to commercial pressures like any business. We feel it’s important that we are able to help all consumers, regardless of whether or not their energy supplier is still trading,” the spokesperson said.
Ofgem already has a system in place which ensures that customers see a fairly seamless transition to a new supplier when their energy company goes out of business. But the new supplier does not have to deal with complaints left over from the old one.
The regulation also ensures that Ofgem can recoup any losses to its renewable energy fund from other suppliers when a company is unable to pay its share.
The system honours debts owed to customers who are in credit on their meter. However other creditors, including the Ombudsman, do not get paid unless the administrators can find enough money.
Last month City A.M. revealed that Economy Energy owed £12m to customers when it went bust. This was part of overall debts totalling £67.6m.