Five energy companies have gone bankrupt in the past two weeks, and with suppliers already comparing recent events to the 2008 financial crisis, households could be in a turbulent race.
What will happen to the energy bills?
Looks like they only go one way and it’s at the top. The Ofgems regulator’s price cap that suppliers can charge customers on their standard variable tariffs was already expected to increase by 12% to 1,277 per year for average (dual-fuel) use on October 1. Households that use prepayment meters, typically the most vulnerable customers, will see their average energy bills climb to 1,309 per year.
Analysts warn that the cap could drop to between 1,440 and 1,500 in the spring of 2022, if the rise in wholesale gas prices continues. The ceiling is set every six months after an exam. In the unlikely event that Ofgem suspends its price cap this week, gas and electricity bills would rise alarmingly, according to Joe Malinowski, who heads The energy shop.
I am with a small supplier. What happens if he goes bankrupt?
Experts warn there will be a tsunami of business bankruptcies unless the government steps in, and it’s the small businesses that are more likely to go bankrupt, with the larger companies taking their customers.
When a supplier fails, Ofgem has a process to automatically reassign customers to a supplier of last resort, so you don’t get interrupted. However, depending on your current rate, you could see your bills increase dramatically some could see increases of 40% (see below).
Utility Point customers, who had broken down at the start of the month, were all transferred to EDF. On Monday, customers of Peoples Energy, another collapsed company, were told they would be moved to British Gas.
Be sure to take meter readings when you are notified of any changes to your supply.
Will I stay on the same rate as that offered by the failing supplier?
No. In previous years, the new supplier sometimes met the old company’s tariffs, but that will not happen now. Ofgem has confirmed that default providers can only put customers they inherit on a capped rate.
Customers who had the best fixed rate deals taken out nine months ago will see their bills increase by up to 250 per year if their supplier goes bankrupt and they stay with the new supplier chosen for them.
Can I change and what happens to the credit I have accumulated?
The vendor you are transferred to will honor any credit balances you have accumulated with your past failed vendor. Once you have switched to the designated provider of Ofgem and any balance has been transferred, you can leave at any time without paying an exit fee, although it is unlikely at this time that you will find a much better deal. Changes typically take 14-21 days.
My small supplier is still in business. Should I move to a larger supplier now?
In theory, there’s nothing stopping you, but it probably makes sense to just sit back and see how it goes, especially if you’re on a cheap rate. It looks like the government is going to have to put some sort of bailout in place, so it might be worth the wait.
Are there any cheap deals left?
Most providers pulled all of their cheapest rates on Friday, but a few offers are still being announced. On Monday, a number of companies, including E.ON, were offering one-year fixed prices of around 1,200 per year for dual-fuel. E.ON also has a two-year flat rate, which is only slightly more expensive than the one-year deal, although these may not last long.
The British Gass HomeEnergy Secure tariff has fixed prices until November 2023 and costs around 1,400 per year. This compares to the 1,000 that substitute customers were paying before this crisis.
Should I get a fixed rate offer when the best deals are so expensive?
If you really appreciate price certainty, take a look at E.ON / British Gas offers two years and up. However, if your current rate is significantly cheaper than the current offers, it’s probably worth the wait and see how things go, according to MoneySavingExperts Martin Lewis.
I have solar panels on the roof. Am I isolated from all of this?
Unfortunately not, and if your supplier fails, you will face the added complication of securing your feed rate payments from your electricity supplier. Unless you are off the grid and using only the power you produce, you will be affected by it all just as much as your neighbors.
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