Six small energy firms have gone bust this year – are they safe to sign up to?
More and more customers switch to small and medium energy suppliers as they usually offer better deals than their bigger rivals
SIX household energy suppliers have gone bust so far in 2018, compared to only two in the nine years to January this year.
Yet more and more customers switch to small and medium energy suppliers as they often offer cheaper deals than their bigger rivals.
In 2018, Future Energy, Iresa, Gen4U, Usio Energy, Extra Energy and Spark Energy have all collapsed - with Extra Energy and Spark Energy both going bust in the past week.
But the figures of struggling firms may actually be even higher as some suppliers have sold their businesses or found alternatives for its customers, according to regulator Ofgem.
As a result, it yesterday announced proposals of stricter rules for new energy suppliers entering the market to protect consumers, and they're expected to come into effect in the late spring next year.
Energy suppliers applying for a supply license will then have to demonstrate they have enough funds and resources to manage their business for at least 12 months after entering the market.
They also have to give Ofgem a plan on how they're going to meet their customer service obligations, including procedures on how to handle complaints as well as how to help customers in vulnerable circumstances.
But the fact that customers are switching to smaller suppliers, even if they potentially run a higher risk of going bust, isn't surprising, according to Rik Smith, energy expert at price comparison website uSwitch.
He told The Sun: "There are over 70 suppliers in the market, offering great choice for households to find a good deal and pay less on their energy bills.
"Many challenger brands not only offer cheaper tariffs but also outperform the bigger players in areas like customer service, green energy, and easy account management."
"If you like the price being offered but are unsure about the service, uSwitch runs an annual survey which shows what consumers think of their supplier.
"In 2018, newer, smaller energy companies swept the board for customer satisfaction."
How do I know if my supplier is at risk?
A spokesperson for Ofgem told The Sun there isn't any straightforward way for customers to check if their supplier is about to go under, but also stressed that the regulator will ensure supplies are secure and credit balances protected, should the supplier collapse.
In other words, you'll never have to go without energy, even if your supplier goes bust and it is the smallest on the market.
The experiences of other customers can also give you a good idea of how well your energy supplier is doing.
Citizens Advice ranks energy suppliers' customer service by taking a number of factors into account, and you can find the most recent list .
Some customers may also be tempted to check financial results, but those are necessarily not an indicator of whether a supplier may cease trading in the future.
Meanwhile, only public companies are required to publish such results, meaning most of the smaller energy firms don't.
What happens when your energy supplier goes bust?
Ofgem says it's unlikely that your supplier will go out of business, but if does, the regulator provides a safety net that will make sure you'll always have an energy supply.
Below is a round-up of some of the most common questions:
Will my supply be cut off?
No. Ofgem will move you to a new supplier, and says your energy supply won't be disrupted.
In fact, you won't notice any change, other than a new supplier being appointed for you.
Who will choose my new supplier?
Ofgem will choose your new supplier, following what it claims is a "competitive process designed to get the best deal for you".
Will my bills go up?
Your new supplier will put you on a special "deemed" contract, which means it's a contract you haven't chosen.
Your bills may go up as those contracts can be more expensive, although Ofgem will try to get the best deal for you.
How to switch suppliers and save
SWITCHING suppliers is the best way you can cut your energy bills. Here's what you need to do.
1. Shop around - If you're on an expensive Standard Variable Tariff (SVT) deal you are throwing away up to £300 a year. Use a comparison site like MoneySuperMarket.com or EnergyHelpline.com to see what best deals are available to you.
The cheapest deals are usually found online and are fixed deals - meaning you'll pay a fixed amount usually for 12 months.
2. Switch - When you've found one, all you have to do is contact the new supplier.
It helps to have the following information to hand - which you can find on your bill - to give the new supplier:
- Your postcode
- Name of your existing supplier
- Name of your existing deal and how much you pay
- An up-to-date meter reading
It will then notify your current supplier and begin the switch.
It should take no longer than three weeks to complete the switch and your supply won't be interrupted in that time.
For more advice read our guide on how to switch.
I'm in credit to my old supplier, will I get this money back?
Your new supplier will pay back the outstanding credit you may have.
Once Ofgem has appointed the new supplier, they will contact you to explain how this will work.
I had made a complaint to my old supplier and I'm still waiting for it to be resolved. What happens now?
If you had made a complaint to your old supplier and it had not yet been resolved, you will need to raise the issue again with the new supplier once Ofgem has chosen them.
The new supplier will review if the complaint is still relevant now that you have transferred to them, or if it can be closed.
Can I switch supplier?
Ofgem advises consumers not to switch immediately, and instead wait until your new supplier has got in touch with you.
Once you've been contacted, ask them to put you on the cheapest deal or shop around if you aren't happy with them as a supplier.
You won't be charged exit fees.
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