Customers of defunct energy firms handed hefty 'phantom' bills

The plug has been pulled on at least half a dozen power companies this year sending them into liquidation as the margins are squeezed. Usio Energy is the latest casualty with their 7,000 customers being switched to First Utility by regulator Ofgem.

One question is with energy consumption on the rise the question is why should this seemingly lucrative market see so many companies running out of energy? But a more pertinent one for customers is the way they are often given ‘phantom invoices’ after their supplier has gone to the wall.

Ian Carrotte of ICSM Credit said there was a shocking number of cases where Ofgem allocated the customers of a defunct firm to a new supplier only for the customer to be sent a hefty bill. The Sunday Observer’s Anna Tims highlighted the case of Michael Jennings who received a text and a final statement, both on the same day, informing him that his dual-fuel account was in the red.

She wrote: “The statement bore the logo, livery and customer services hotline of Extra Energy, which had supplied his home since 2016. The alarming thing was that Extra Energy ceased trading last November and the pensioner, along with its other customers, had been transferred to Scottish Power. Moreover, the charges, which covered a one-month period between October and November 2018, amounted to £2,919.12.

“Jennings called customer services and discovered that the alleged debt was based on an estimated reading and was told that none of the actual readings provided over the years could be retrieved. He then contacted Scottish Power, which confirmed that his account had a zero balance when it was transferred last year.”

Despite this the phantom Extra Energy said its figures were correct. “I was told I had three choices: to pay in full immediately, to pay over three months or to await a collection agency,” Anna Tims reported Mr Jennings as saying.

He said: “When I requested a bill, the South African operative asked for my first name twice. When I checked the number online I found that it is attributable to a number of scams. I have always paid £80 per month by direct debit and fail to understand how this alleged figure could have been reached in a single month.”

The shock was it wasn’t a scam. The administrators of Extra Energy were PricewaterhouseCoopers (PwC), who claimed the accounts of the defunct firm were a shambles and started to send out what they claimed were invoices of undercharging in the past – despite the invoices arriving months later. The Sunday Observer took up Mr Jennings’ case and suddenly his bill was slashed in half with no obvious explanation. As a result of this and other cases highlighted by consumer journalists Ofgem will publish the results of a consultation on new measures to safeguard customers when a supplier goes bust.

Anna Tims said this follows complaints that those with a defunct company have been moved on to higher tariffs with their new supplier, or aggressively pursued by debt collectors acting for the supplier’s administrators as in the case of Mr Jennings.

Back to the question of why are so many energy firms going bust. Back in 1999 the then Labour government opened up the electricity energy market to allow competition from a variety of firms and to let the public choose who supplied them.

It quickly led to the birth of a number of new energy companies who have competed against what has become known as the Big Six, namely British Gas, EDF Energy, E.ON, Npower, Scottish Power, and SSE. The Big Six are largely the previous publicly owned power companies or the companies that took them over and they still dominate the field with around 75% of the market. And there lies the problem. Usio Energy had just 7,000 customers meaning they couldn’t compete against the six giants who have hundreds of thousands of customers with the resulting economy of scale.

Since 1999 the number of people employed by the energy firms has fallen slightly as the power firms seek to cut costs while conversely prices have risen compared to the 1990s when they were proportionately at their lowest. Since 2018 Affect, Brilliant, Economy, Extra, Flow, Future, GB, Green star, Iresa, One Select, Out Power, Solarplicity and Spark Energy have all been switched off. When they go bust their customers are moved to a new supplier, so they don’t get cut off, however the suppliers to those firms are often left out of pocket while jobs are lost. For instance Inside Media reported that when GB Energy went down their creditors and customers (who were in credit) were left with a loss of around £40m. That’s just one firm.

Ian Carrotte of ICSM Credit said it is all about survival of the fittest in retail energy markets. He said: “It’s a Darwinian situation as the competing companies fight it out for market share with lower price deals meaning customers are more likely to switch suppliers.”

Many ICSM Credit members are major consumers of energy as they run factories, offices and use power hungry machinery and so are mindful of the competing prices. Some have been attracted to energy firms offering massive discounts if they buy their energy in advance in the summer when prices are lower. This sounds like a good plan until their supplier joins the long list of casualties and goes out of business. Ofgem say that anyone in credit will be reimbursed by the new supplier however they advise you reading your meter when a firm goes into liquidation so you can dispute the amount you are owed if you are offered less than expected. This has clearly not been the case with a raft of cases like that of Mr Jennings highlighted by consumer journalists.

For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.

To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send an email to Ian.carrotte@icsmcredit.com

Pic: The Independent