An energy expert tells woman & home what happens to your loan if your supplier goes bankrupt and which energy providers are currently at risk.
The UK is currently facing an energy crisis that will hit many of us at the start of the winter months, but luckily there are experts available to help us answer our concerns.
Love Energy Savings is a company that has been helping its customers save money on their energy bills since it entered the market in 2007. They have relationships with the Big Six energy suppliers as well as a multitude of smaller independent suppliers, which puts them at the forefront of advice and action.
Woman & home spoke to Phil Foster, CEO of Love Energy Savings, about what these changes mean and how they could affect us.
1. What happens if your utility company goes bankrupt?
Phil explains that while bankruptcy of our utility company is a fear that worries many of us, there is nothing to worry about as a regulator is in place to make sure you switch to another provider.
“If your utility company goes bankrupt, it will not affect the gas or electricity flow into your property as it will go on uninterrupted,” he says.
“Ofgem (the UK gas and electricity regulator) makes sure you switch to a new utility. They refer to this process as ‘The Ofgem Safety Net’, which means that when a supplier ceases trading, Ofgem steps in to ensure supplies continue and contracts are met. “
Phil assures us that many customers won’t even notice the transition if this happens.
“Ofgem takes responsibility for finding a new supplier for the closed company’s customers and will do everything in their power to ensure that you do not notice any transition.”
“When you select a new supplier, Ofgem will post your account. This competitive process is designed to get you the best deal. This usually takes a few days and is often referred to as the ‘supplier of last resort’.”
That means luckily your utility bills won’t skyrocket if your supplier actually goes out of business!
2. What happens to your credit if your utility company goes bankrupt
Phil adds that your new supplier can cash this out once you have amassed a large amount of credit with your current supplier. If the new supplier cannot comply, there are also systems in place to remedy the situation.
“Any balances accumulated with your old utility will be carried over. If there is no utility available to take over your utility, the Ofgem regulator and the government will work together to appoint a special administrator.”
“Your old tariff ends automatically and a new provider arranges a special ‘Deemed Rate’ contract for you. This will run for as long as you wish.”
He adds: “Well-respected contract rates are usually quite expensive. The new entrant will automatically place you on this type of deal as they run a higher risk of not being referred and you may not get your money back. “
But he says reassuringly: “Ofgem will first try to choose an energy supplier who can reimburse you in full or in part.”
If you have a large amount of credit with your old supplier, you will need to contact the administrator who will process his debt to register as a creditor and let you know how much you are owed.
“You need some evidence so that you should have up-to-date energy bills on hand. Any refunds can take over 12 months and you may just get some money back.”
It seems that while losing your credit is unlikely, it is best to be prepared and keep any previous energy bills that show how much credit you have deposited so far.
3. Which energy companies have gone bankrupt so far?
In the last month, six utilities went bankrupt. Phil says, “Starting today [September 28, 2021], the following suppliers went bankrupt last month: PFP Energy, Money Plus, Utility Point, People’s Energy, Green and Avro Energy. “
4. Which energy companies are at risk?
While it cannot be confirmed which suppliers are at risk, Phil has indicated that smaller suppliers are particularly at risk and there are rumors about some suppliers.
“There is speculation that Igloo and Bulb Energy are in a crisis, but Ofgem predicts that many more suppliers will likely go bankrupt in the coming months – especially smaller or independent suppliers,” he told woman & home.
5. Why are energy prices rising?
Phil says the rise in energy prices in the UK is due to a variety of factors, rather than a single reason.
“Several factors have played a role in the 250% increase in energy prices since January, which means there is no single reason for the UK energy price increase. However, here are some of the reasons that contributed to the price hike. “
Phil then lists six main factors that contributed to that price spike:
- A cold in winter in 2020 and 2021 caused the UK to cut much of its national gas shortage at a time when gas is already difficult to obtain.
- Post lockdown energy demand has soured across Asia – which supplies gas to most of Europe – leading to a race to replenish gas storage tanks before they return to colder temperatures.
- Ofgem’s increase in energy price cap, which will go into effect October 2021 and which will add around £ 139 per year to household energy bills.
- Britain has had one of the poorest winds of the summers at the worst times since 1961, resulting in very little wind power being generated.
- Delays related to the Nord Stream 2 – a long offshore natural gas pipeline connecting Europe to a large reserve in Russia – had some complications.
- After all, demand has increased in recent months following the shutdown of a large power cable supplying electricity from France. “