Small and innovative energy suppliers have been encouraged to compete against larger companies in order to bring more competition into the energy market. However, is it sensible and safe to entrust your gas and electricity supply to small energy companies?
I recently decided to switch our gas and electricity to Bulb from utility Warehouse as not only would we save on our energy bills, we would also be using 100% renewable electricity and 10% green gas.
Although Utility Warehouse is not one of the largest energy suppliers; the ‘big six’ companies such as British Gas, and E.ON dominate this sector, it is a bigger and more established company than Bulb, who are relative newcomers.
Was I taking a risk by switching to a small energy provider? Would our lights go out and heating grind to a halt if Bulb went bust?
Energy companies can go bust
All energy companies are operating in a very competitive marketplace. After all, this is what successive governments have encouraged so that consumers benefit from increased competition amongst suppliers.
This has lead to casualties. GB Energy suddenly stopped trading in November 2016 leaving their 165,000 customers facing higher bills, however they still continued to receive electricity and gas, as I will explain….
It was a rise in wholesale energy prices that caused GB Energy problems. They did not have the purchasing power to forward purchase energy and hedge against cost rises, whilst offering rock bottom prices to their customers.
Squeezed at both ends, their position became untenable, forcing them to shut down their business.
What happens if your energy supplier goes bust?
Small energy companies are all susceptible to fluctuating wholesale prices and vary in their abilities to forward purchase when prices are low, so what happens when they succumb and go bust?
If your supplier stops trading, you can be assured that industry regulator, Ofgem has procedures to ensure that you still receive electricity and gas.
Ofgem will find a new supplier to take over your supply and put you on “deemed contract” with this supplier. This is very likely to increase your costs as the supplier is taking on more risks, as they are unable to perform their usual credit checks on this influx of new customers.
If my prices rise, can I switch?
When your new supplier takes over your account on the “deemed contract” basis, you should ask them for their best prices and move to their best deal as soon as possible.
If this supplier is not competitive, then you are free to switch to a better deal with another supplier and you should do this as quickly as you can.
What happens if my account is in credit if my supplier stops trading?
If your account is in credit when your energy supplier goes bust, it will be the responsibility of the new supplier found by Ofgem, to refund this money to you.
You should take meter readings and tell the new supplier how mush you are owed straight away, and then they will get back to you, to verify the situation and then credit your account accordingly.
This process might take some time, unfortunately, however the processes implemented by Ofgem do ensure that you will not be out of pocket.
If you owe money to your now defunct supplier, then it will depend on the “deemed contract”. You might have to pay back your debt to the new supplier appointed by Ofgem, or you may be required to pay back the money to your old supplier.
In either case, it is important to take meter readings and to wait and see who contacts you with payment instructions.
I am reassured by Ofgem safeguards
I am reassured that there are procedures in place to protect our electricity and gas supplies and to resolve any financial issues, should Bulb stop trading.
It will certainly be an enormous hassle moving to the new Ofgem appointed supplier under the “deemed contract”, and then it will be another upheaval if this supplier is not offering the best deals, so that we have to switch to yet another energy provider.
Switching supplier takes about two weeks, so this would be quite a stressful time, however I, personally, feel that it is worthwhile taking this very small risk.
Bulb are offering an attractive proposition to their customers, and seem very competent and customer focused. However, not only can you save money by switching to Bulb, but you can EARN money by switching to them too!.
I am happy to switch to them safe in the knowledge that the lights will stay on, and the gas will flow if the worst happens. I might have a few sleepless nights though!