Failed Suppliers - aren't they liable in contract for the price fixed and owe compensation?

PennineAcute

Surely you would just be an unsecured creditor and be at the very end of a list of people.  Any money would be long gone before your name appears at the top of the list.

MWT

PennineAcute said:

Surely you would just be an unsecured creditor and be at the very end of a list of people.  Any money would be long gone before your name appears at the top of the list.

It is a moot point, as there is no breach of contract, the contract has been correctly terminated as per the T&C, upon the loss of the supply licence.

[Deleted User]

I am sure that Ofgem could come up with a set of rules that required suppliers to hold consumer credits in escrow along with third-party insured fixed price contracts. However, this would only come at significant additional cost to consumers. Under SoLR procedures, the energy supply is protected and consumer credits are protected by Ofgem. 

The OP might like to look at his/her broadband contract. If an ISP goes bust then the connection is just terminated and the OP would have to enter into a new contract with another ISP. There would be some days delay before the broadband connection was re-established.

MWT

emmajones1976 said:

MWT said:

PennineAcute said:

Surely you would just be an unsecured creditor and be at the very end of a list of people.  Any money would be long gone before your name appears at the top of the list.

It is a moot point, as there is no breach of contract, the contract has been correctly terminated as per the T&C, upon the loss of the supply licence.

Exactly. But apparently I shouldnt have contributed to the thread 🙄🙄

The only valid point the OP had was the rule around offsetting...

If there had been a breach, and if the customer was in debt to the failed supplier then yes, they could have used the damages claim to offset against the debt they owed.

... but, as you pointed out, should the boot be on the other foot and the customer was in credit then it would be of little use being able to file a claim against the failed supplier as an unsecured creditor.

In the end though, no breach, so no point

Astria

I do remember being in debt to a failed provider, and my debt was sold to EDF far faster than I could come up with any legal paperwork, so it would be difficult to offset any damages against that. So you are still trying to sue a company that has gone bust.

But, that said, it clearly stated in the contract that it would become null and void as soon as they became a failed provider, so I don't see how I could have sued them anyway.

Oxy1

Dolor said:

I am sure that Ofgem could come up with a set of rules that required suppliers to hold consumer credits in escrow along with third-party insured fixed price contracts. However, this would only come at significant additional cost to consumers. Under SoLR procedures, the energy supplier is protected and consumer credits are protected by Ofgem. 

Another off topic but not a stupid off topic - so happy to reply substantively on this.

You say that if Ofgem were to introduce additional requirements to safeguard such contracts, for example by requiring suppliers to ensure them externally it would be at significant additional cost to consumers.

I see why you are saying it but I disagree and actually think it would be good for consumers because:
1. Under current system consumers were encouraged to think they were safe because of SoLR and similar rules. Many people were aware that safeguards exist but only a really tiny proportion knew all the final details and were able to analyze all the eventualities. In fact some people would be better off with no such protection at all - they would choose more reliable companies and wold enjoy the full contracted length of their fixed price!
2. You mention additional cost to consumers but these failures were also at huge cost to consumers. Curtailments of fixed price contracts   meant loses to the tune of hundreds, even thousands to consumers.
3. It will weed out dubious companies. Far to many small companies were entering the market lacking even the basic business competence yet alone ability to manage energy price fluctuations.
4. You and many other people might not realize or even understand this (as not many people have good understanding of derivative markets) but for  a reasonably run company such an insurance need not be costly at all... IF properly run AND properly risk managed they would have been entering into forward energy contracts that would have massive high value after energy price rise. So they could hold such forward and future contracts (that they SHOULD have entered into anyway if they sold fixed price deals) in escrow with the insurer that underwrites fixed price deals for the consumers.   Insurer would know that should prices rise those forward derivative contracts would increase by about the same amount and hence such contracts would not be too risky to underwrite.

FreeBear

wittynamegoeshere said:

[Deleted User] said:

The OP might like to look at his/her broadband contract. If an ISP goes bust then the connection is just terminated and the OP would have to enter into a new contract with another ISP. There would be some days delay before the broadband connection was re-established.

Oh nooooo.  Are all the ISPs about to go bust?  Perhaps Russia is holding back all the supplies of Megabytes, forcing the wholesale price massively up?

Europe lost 1GB of capacity thanks to Brexit... Doesn't seem to have affected their broadband yet.

Oxy1

Astria said:

I do remember being in debt to a failed provider, and my debt was sold to EDF far faster than I could come up with any legal paperwork, so it would be difficult to offset any damages against that. So you are still trying to sue a company that has gone bust.

Ok, this has not happened in the case I am on right now. The balance is still pursued by liquidators of the bust company ... even from the name of the bust company.

In your case I still would not think that all is lost as it might have  been possible to challenge such separation of balances whereby through purported assignments you have to pay what is due by you but can not get paid on what is due to you. Though this a completely different topic.

Oxy1

So thanks to those who replied on topic - that is advised that it is likely that the supply contract contains a clause to the effect that the obligation to honor the contracted price ceases when energy supply license is lost.

Will have to look at the contract in detail as even when such clause exists it might be open to challenge either under common law or unfair terms / consumer protection legislation and the like. After all a term which allows the seller to walk away from contract when price moves in consumer's favour is not a trivial term to be hidden in small print in consumer contracts and is extremely detrimental to consumer. Essentially it is like an insurance that becomes void if insured event occurs!

PennineAcute

MWT said:

PennineAcute said:

Surely you would just be an unsecured creditor and be at the very end of a list of people.  Any money would be long gone before your name appears at the top of the list.

It is a moot point, as there is no breach of contract, the contract has been correctly terminated as per the T&C, upon the loss of the supply licence.

Yes, you are right.  I was playing what if this could happen.