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.
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We're proposing a new safety net for consumers' cash in unlikely event a supplier goes out of business: https://t.co/2emyMPO3yF
— ofgem (@ofgem) June 13, 2016
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.
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