Energy suppliers that failed this year lost almost £400 million of their customers’ money and left behind billions of pounds of costs for all households to pay, Centrica’s boss said yesterday.
Chris O’Shea, chief executive of the British Gas owner, criticised collapsed suppliers for “gambling with their customers’ money” and said that if they had been banks “it would, quite rightly, be a national scandal”.
This year, 15 energy companies supplying 2.4 million households failed, 13 in the past two months alone as wholesale gas and electricity prices soared. Many of the costs arising from their collapses, including reimbursing customers for their lost credit balances, are recouped from all households on their energy bills. Every billion pounds of costs left behind equates to about £35 for every household in Britain.
Writing for The Times Red Box, O’Shea likened the growing crisis in the energy sector to the financial crisis of 2008 and called for tougher regulation to prevent it happening again.
His call came as EDF, another large supplier, warned that it did not want to take on any more customers from failed suppliers after taking on 220,000 customers from Utility Point last month, and questioned whether Ofgem would force it to do so.
Energy companies need to be regulated like banks
Households who pay energy suppliers by direct debit often build up credit balances in the summer, but suppliers that fail have usually spent this cash. O’Shea said that “almost £400 million” of customer credit had been lost with failed suppliers this year.
“It matters not only on ethical grounds but also because everyone else has to pick up the tab. The cost of ‘replacing’ the missing £400 million is ‘socialised’ and now falls to every bill-payer in the country through a premium on gas and electricity prices,” he wrote.
“Add to that the ‘socialised’ loss on buying energy today to supply the 2.4 million customers of these failed companies, and the unpaid social, renewables and housing insulation costs which energy suppliers are supposed to meet and the total cost is already in the billions”.
O’Shea said that energy suppliers should be subject to minimum capital requirements, should be made to ringfence customer credit balances and should have to pay their bills for policy schemes more regularly so that they could not amass huge unpaid bills.
There are growing concerns in the industry about the short-term costs incurred by solvent suppliers that take on customers from failed suppliers. Centrica has taken on half a million. A spokesman said it usually took two years to recoup the costs via the household levy.