Over 280,000 energy customers have seen their utility bills increase overnight, some by hundreds of pounds, after a string of suppliers ceased trading over the last 18 months.

Consumer group Which? found that of the 925,000 customers switched by energy regulator Ofgem to alternative energy deals, 283,000 of those were moved onto standard variable tariffs (SVTs).

When an energy supplier ceases trading, Ofgem appoints a ‘supplier of last resort’ to inherit customers of the failed firm. These suppliers are usually required to cover the costs incurred from taking on the additional customer base, meaning that in some cases consumers face a lottery that sees them transferred onto an expensive tariff.

Since the start of 2018 ten energy suppliers have ceased trading, with many struggling to make a profit after offering cheap rates to attract new customers. This prompted Ofgem to announce more stringent guidelines for new supplier applicants, such as demonstrating they can fund operations for the first year of trading, compliance with regulation, and evidence of satisfactory customer service.

Natalie Hitchins, head of home products and services at Which?, said:

It’s wrong that energy customers face a lottery when their supplier goes bust – and that those who have followed advice to do their research and shop around for a better deal can be hit with such substantial price hikes.

 

Ofgem must ensure its new checks are sufficiently robust to bring an end to this cycle of supplier failures, and alongside the government should explore ways to lessen the financial burden and make the process easier for consumers when energy firms collapse.

 

For now, switching is still the best way to get a good deal and better service, so anyone unhappy with the service they are receiving or the price they are paying should check the results of our energy customer satisfaction survey and find a better-rated supplier. They could save around £300 a year.