MSE News: Levy planned to provide 'safety net' for energy customers if firms go bust

edited 14 June 2016 at 4:42PM in Energy
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edited 14 June 2016 at 4:42PM in Energy
Regulator Ofgem is proposing to introduce a small levy on all energy bills to ensure customers don't lose out if their energy firm becomes insolvent...
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'Levy planned to provide 'safety net' for energy customers if firms go bust'
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  • edited 13 June 2016 at 5:07PM
    moleratmolerat Forumite
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    edited 13 June 2016 at 5:07PM
    That's right, charge customers extra to help protect themselves from a broken (supposedly regulated) industry. Lack of oversight by the regulator, failure to check on the fitness to hold a licence and ongoing financial situation is what really needs looking at. OFGEM, as usual, pointing the finger (and the cost) elsewhere. Never going to look inwards though are they !
  • HappyMJHappyMJ Forumite
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    How about ring fencing the money?

    The money would be safe then as it's still owned by the customer until a bill has been produced.

    In the event of supplier failure when a new supplier takes over the remaining credit goes with them after the final bill has been paid.

    Or hurry up and get these smart meters rolled out so we can get accurate monthly billing instead of estimated quarterly bills only adjusted to actual figures once a year.
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  • edited 13 June 2016 at 5:35PM
    SystemSystem Forumite
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    edited 13 June 2016 at 5:35PM
    Yet again, OFGEM demonstrates how incompetent it is as a regulator. There is no way that consumers should pay directly for badly run/incompetent domestic energy suppliers. Any compensation scheme should follow the precedent adopted by the airline sector. The ATOL protection scheme is funded by a levy on the operator. I know some will argue that this cost will ultimately be passed on to customers in higher charges but at least then it sits as part of the competitive pricing process.

    Alternatively, OFGEM could insist that future 'fines' are placed into an escrow account against supplier default rather than let suppliers make tax-deductible contributions to Charity.

    Edit:

    Having read the paper more carefully, OFGEM's preferred options seem to be driven more by its perception of additional workload on OFGEM staff and costs to suppliers, than financial protrection for energy consumers.
  • robin58robin58 Forumite
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    As I always say, every time a so called customer protection agency with 'OF' in the title proposes a change, I always have to pay for it.

    This time I say levy the energy company per unit they supply over the year.

    Tough if the additional workload costs Ofgem more money in staff costs. Don't propose a stupid idea then.
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  • cheesetoastcheesetoast Forumite
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    And what would they do with all this levy money collected, if no suppliers end up going bust, and the funds just build up? Pay it back? (Yeah, right)
  • Bark01Bark01 Forumite
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    In my opinion there is a high risk of some of the smaller energy suppliers going insolvent. Most are only able to survive as the wholesale price has decreased for a number of years and their short hedging window allows them to take advantage of this.

    Over recent weeks the wholesale price has shown sustained growth so if the smaller suppliers haven’t brought enough cheap energy to cover their current customers they are at risk of selling energy for cheaper than they have brought it.
  • Hoopie1Hoopie1 Forumite
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    HappyMJ wrote: »
    How about ring fencing the money?

    The money would be safe then as it's still owned by the customer until a bill has been produced.

    In the event of supplier failure when a new supplier takes over the remaining credit goes with them after the final bill has been paid.

    Or hurry up and get these smart meters rolled out so we can get accurate monthly billing instead of estimated quarterly bills only adjusted to actual figures once a year.

    If you did that then all of these businesses would need to find new ways to finance themselves. If they could it would be likely to be expensive, and would be passed on through your bill. For many it wouldn't be possible as they are formed using the bare minimum of capital.
  • lisa110rrylisa110rry Forumite
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    "While the prospect of an energy supplier going out of business is unlikely, it's not out of the question, and if an insolvency were to occur the subsequent financial loss for an average customer whose account is in credit could total more than £100."

    I find it interesting that this is being discussed at this time. On the Extra Energy thread we were discussing this a year ago! Can't help but wonder what is going on in the background to cause this discussion.
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  • Bark01Bark01 Forumite
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    lisa110rry wrote: »
    "While the prospect of an energy supplier going out of business is unlikely, it's not out of the question, and if an insolvency were to occur the subsequent financial loss for an average customer whose account is in credit could total more than £100."

    I find it interesting that this is being discussed at this time. On the Extra Energy thread we were discussing this a year ago! Can't help but wonder what is going on in the background to cause this discussion.

    See my post above - Wholesale costs are increasing.
  • Hoopie1Hoopie1 Forumite
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    lisa110rry wrote: »
    "While the prospect of an energy supplier going out of business is unlikely, it's not out of the question, and if an insolvency were to occur the subsequent financial loss for an average customer whose account is in credit could total more than £100."

    I find it interesting that this is being discussed at this time. On the Extra Energy thread we were discussing this a year ago! Can't help but wonder what is going on in the background to cause this discussion.

    The statement from the author that I have marked in bold is false IMO. In the next three years I am pretty sure that you will see some of the current suppliers declared insolvent. Most of the new entrants are small and not financially strong, and despite what many would have you believe, it is a very, very hard market to make any money in. There isn't enough business around to sustain the number of companies that are currently active.
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