Ofgem proposes charge on household energy bills to cover customers should firms go bust

Household money

Updated on 14 June 2016 | 4 Comments

The watchdog wants to create a safety net that covers customers if a firm goes bust – but you'll have to fund it

Ofgem has proposed adding a small charge to household energy bills to create a safety net that would protect customers should an energy supplier go bust.

More than 40 companies now offer gas and electricity deals and Ofgem is warning of the danger of one of them going under.

If the proposals become reality, it could “have a small impact on bills”, it said.

See if you could save hundreds: compare energy deals

Rachel Fletcher, Ofgem’s senior partner for consumers and competition, 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.”

How you’re protected now

If a gas or electricity company goes bust, Ofgem appoints a replacement firm so that households will continue to be supplied with energy. When finding a replacement, Ofgem will factor in which companies can best protect households’ credit balances.

This could lead to complications for customers of failed companies as payments are spread evenly across the year, so households tend to be in credit in the summer while facing a deficit in the winter.

Ofgem says that a customer’s balance peaks at just over £100 each year and that, without regulation, customers are unlikely to get all, or possibly any, of their money back if a supplier fails. 

Get yourself a better energy deal at the loveMONEY energy centre

Take control of your household money:

The 'best wine in the world' costs less than a fiver

The shocking amount millions are throwing away on over-priced energy bills

8 online shopping tricks that could save you hundreds

Are you owed £100 by Argos? Store admits to overcharging customers

Comments

Be the first to comment

Do you want to comment on this article? You need to be signed in for this feature

Copyright © lovemoney.com All rights reserved.

 

loveMONEY.com Financial Services Limited is authorised and regulated by the Financial Conduct Authority (FCA) with Firm Reference Number (FRN): 479153.

loveMONEY.com is a company registered in England & Wales (Company Number: 7406028) with its registered address at First Floor Ridgeland House, 15 Carfax, Horsham, West Sussex, RH12 1DY, United Kingdom. loveMONEY.com Limited operates under the trading name of loveMONEY.com Financial Services Limited. We operate as a credit broker for consumer credit and do not lend directly. Our company maintains relationships with various affiliates and lenders, which we may promote within our editorial content in emails and on featured partner pages through affiliate links. Please note, that we may receive commission payments from some of the product and service providers featured on our website. In line with Consumer Duty regulations, we assess our partners to ensure they offer fair value, are transparent, and cater to the needs of all customers, including vulnerable groups. We continuously review our practices to ensure compliance with these standards. While we make every effort to ensure the accuracy and currency of our editorial content, users should independently verify information with their chosen product or service provider. This can be done by reviewing the product landing page information and the terms and conditions associated with the product. If you are uncertain whether a product is suitable, we strongly recommend seeking advice from a regulated independent financial advisor before applying for the products.