Ofgem proposes safety net for consumers’ cash

13 Jun 2016 03:09 PM

More suppliers in the market is increasing competition
Consumers can be confident that their energy supply is guaranteed even if a supplier goes out of business
Proposals will provide a safety net for customers’ credit balances if their supplier becomes insolvent

Ofgem has yesterday published proposals to protect customers’ money in the unlikely event a supplier goes out of business.

Supplier failures are rare. But if a supplier does go out of business, Ofgem appoints a replacement supplier to ensure that customers continue to be supplied with energy. In these circumstances, some of the supplier’s customers’ accounts may be in credit. As direct debit payments spread the cost evenly throughout the year, it is not uncommon for energy customers to be in debit during winter and build up credit in the summer. Ofgem estimates that it would not be unusual for a typical customer’s credit balance to peak at a little over £100 each year.

As part of the process for selecting a replacement supplier Ofgem will take into account who can best protect consumers’ credit balances. Ofgem is also proposing to allow, on a case by case basis, the costs of reimbursing the credit balances to be spread across all energy customers. This would better protect customers’ money and have a small impact on bills.

Ofgem’s senior partner for Consumers and Competition, Rachel Fletcher said:“We are proposing a safety net to protect customers’ credit balances in the unlikely event of a supplier failure. There are big savings to be made from switching of around £200-£300 and now over 40 suppliers to choose from. These protections are designed to give people peace of mind so they can have complete confidence to shop around for the best deal.”

Ofgem offers simple and impartial advice on how to get a better deal viawww.goenergyshopping.co.uk.

Notes to editors

For more details see today’s consultation: Our proposed approach to dealing with supplier insolvency and its consequences for customers.
Direct debits and credit balances.

Ofgem rules state that a customer can ask the supplier to refund their credit balance at any time and the supplier cannot unreasonably refuse this.

Suppliers review customers’ direct debit payments regularly. Our factsheet gives more information about direct debits including an outline of the large suppliers’ direct debit practices.

The government has also secured automatic annual refunds from some large suppliers.

About Ofgem

Ofgem is the independent energy regulator for Great Britain. Its priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating networks.

For facts, figures and information about Ofgem’s work, see Energy market facts and figures.

For further press information contact:

Lisa O'Brien: 0207 901 7426