Suppliers who stepped in when dozens of rivals collapsed during the last year could be paid £2.4 billion from energy bills. The charge will be spread across all households in Great Britain, and will likely reach between £2.2 billion and £2.4 billion, regulator Ofgem has revealed.
When a firm goes bust, its customers are taken on by a rival which ensures that customers are kept on supply and seamlessly transferred to the new supplier. But this comes with costs to the new supplier, which is able to claim back the money from the rest of the market.
More than 30 energy suppliers have gone out of business since the beginning of last year. But, in evidence provided to the Business, Energy and Industrial Strategy Committee, Ofgem said that a vast majority of the billions that companies will claim will be to buy enough energy in advance to supply their new customers.
Industry experts say that some of the firms that went out of business were poorly run, but others were responsible businesses that were simply not able to withstand the giant rise in wholesale gas prices over the last year. According to Citizens Advice, the charge could add as much as £94 to an average household bill at a time when energy costs are set to go through the roof anyway.
From April 1 the average household whose bills are limited by the price cap will go from paying £1,277 per year to £1,971 per year. At current predictions average bills could rise by another £1,000 per year from the beginning of October.
Gillian Cooper, head of energy policy at Citizens Advice, said: “We need to move to a world where the costs of failures are not fully borne by energy bill payers. We have estimated that the costs of all these energy supplier failures is going to cost in excess £2.4 billion.
“That is about £94 per household. And that does not include the cost of the failure of Bulb which is being treated separately under the special administration regime.”
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