MSE Blog: Paying upfront – what happens when an energy firm goes bust?

Former_MSE_Helen

Hi all, this is a thread to discuss the MSE blog:
Paying upfront – what happens when an energy firm goes bust?


"Two table-topping energy companies – Spark and Flow Energy – are asking customers to pay for their energy upfront..."


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Nada666

Nearly EVERY table-topping tariff has this requirement, not just those two. And with the others the balance is a lot more than one month's instalment.

dogshome

So how long will it be before we see a 'Farepack' within the utility industry ?

We live in interesting times, no wonder EDF and others are being reluctant brides in Atomic Energy power - With Gas fracking given the go-ahead, who knows what the price of Elec generation will be in 5 years time

I live in the Eastern region and well remember the demise of TXU who called it wrong and bought high price Elec on forward contracts, only for wholesale prices to fall way below their fixed contract prices - They just stopped selling Elec, ( If you don't sell it, you don't have to buy it so stitch-up purchase contracts don't matter ), and Elec supplies to their customers were just taken over by other suppliers who had forward-bought more wisely.

However, all this took place way before the Utility Industry began to worship the God, 'Direct Debit' and years before 'Pre-payment' was even dreamed of.

But now we have almost every supplier sitting on £millions of customer cash every Autumn, including some new players, without any of the protection such as "Ring Fenceing" which is now the norm. in payments toward future services or goods markets such as Xmas hampers, the value of which is a mere bagatelle against Utility billing.

Is there anybody out there - are you listening Ofgem?

davidgmmafan

I was thinking about this the other day when flow energy came up cheaper for me. I wouldn't touch spark with someone else's bargepole BTW.

I thought about it, and I figured there should be some protection in place, but there probably isn't.

I understand the concern about people sitting in credit, but equally if people are obsessed with not being in credit and then something goes wrong they are struggling from the get go.

I don't advocate overpaying by huge sums, but if you stretch to it a small overpayment gives some margin for error.

The smaller suppliers are more at risk IMO, the way Spark handles objections gives the impression they are operating on a shoestring. I'd imagine Ofgem would be interested in the way they reverse the usual rules regarding objections (ie that there should be a bill outstanding first, not we object then you must give us a reading so we can bill you and you must pay it).

Wywth

There are other suppliers that want to be paid in advance too.

e.g. Ovo do not like their customers going into any form of debt.
I've been with Ovo in the past and would go back to them again if they offered a low cost solution to my energy usage.

What about all those on pre-payment meters??? :eek:
Or all those who have had to pay a security deposit to obtain a credit meter: :eek:

This MSE article appears more about knocking the new boys on the block who offer a low cost energy solution in a market dominated by the big 6 suppliers (who are often much more expensive), and causing tabloid style alarm rather than saving consumers money which is what this website used to be about.

e.g. how may people actually have a energy account with one of the big boys that is perhaps £100s in credit?

In the unlikley event either supplier you single out does go bust owing the customer money, then I think it's a risk worth taking taking. Even if they go belly up on the day after you pay (so owe a full month), it's probably less than the amount you could save by switching to such a supplier (assuming they don't go bust)

When Ebico started out, many thought they would go bust citing an unsustainable business plan. However, 10 years on they are still here, still gaining customers ...

Nada666

Wywth wrote: »

What about all those on pre-payment meters??? :eek:

Eh? They are paying as they go. Very few customers stick hundreds of pounds on their meters over summer.

Wywth wrote: »

Or all those who have had to pay a security deposit to obtain a credit meter: :eek:

The Co-operative charge more than £300 each and every year in standing charges for prepayment meters. More than double a credit meter.

Interest rates paid on returned deposits are greater than in most bank accounts. I would judge it a safer investment than any bank promising more.

undaunted

What happens, you'll probably lose your money!

If you expect the company to go bust you'd be better off either not entering into such an agreement and / or looking elsewhere

chanz4

undaunted wrote: »

What happens, you'll probably lose your money!

If you expect the company to go bust you'd be better off either not entering into such an agreement and / or looking elsewhere

Fully agree, plus these company resell under another supplier anyway

ADM34

I have been paying £77 DD, plus £23 extra, to my energy company for the last couple of years, and I have always been in credit at meter reading time, once to the tune of nearly £500!! Last month I received an email informing me that they were increasing my DD to £107, a £30 increase for what? So they can bank it and gain interest and increase their profits !! I rang them up and complained, they condescended to reduce it to £93.60 per month with a review in 3 months !! I told them in no uncertain terms that, as my contract with them expires in 3 months, I would be reviewing it not them, and that I would probably cancel the DD and put the money away in an interest paying account, (even 0.5% is better than nothing), and pay them on receipt of my bill, i.e. in arrears !! Since then I have had several emails from them asking me to join their Customer Service Review Team, and advising me that I can always ring them to discuss my account options !!

dude89

ADM34 wrote: »

and that I would probably cancel the DD and put the money away in an interest paying account, (even 0.5% is better than nothing), and pay them on receipt of my bill, i.e. in arrears !!

I'm sure 0.5% is less than any DD discount you stand to lose by paying on receipt