What happens if my energy company collapses?
What happens if my energy company collapses?
From irate petrol station queues to collapsing energy suppliers, watching the 10 o’clock news has begun to feel like the beginnings of a Black Mirror episode...
According to the BBC, more than 1.7 million people in the UK have watched their energy provider go bust in September.
But, what does this mean? And how would this affect you?
Ultimately, there is no need to panic. If your energy supplier collapses, you won’t suddenly find yourself cut off from electricity or heating, shivering in a corner and lighting newspapers for warmth. There are systems in place to protect you.
However, it’s important to understand what you do (and don’t) have to do. From meter readings to expensive tariffs, here’s everything you need to know…
Why are energy providers collapsing?
As the global economy grapples to recover from the COVID-19 pandemic, supply disruptions and a surge in demand has caused the price of gas to skyrocket. This has particularly affected small energy providers, who usually attract customers by offering cheap fixed term deals that undercut the industry’s big dogs. Operating on smaller margins, the increase in cost has caused some of these suppliers to collapse.
So far, 10 UK energy providers have gone bust in just 2 months, and unfortunately it looks like more will follow. And it’s not just the UK that has been affected, the price of gas has significantly risen across Europe and Asia too.
What is Ofgem and what do they do to help?
Ofgem is the government-backed energy market regulator and they are responsible for looking after us - the consumers.
When a supplier collapses, Ofgem steps in and protects the energy supply. You won’t have to change energy provider, Ofgem handles that for you, switching you across to a new one so there will be no interruption to your heating or electricity. Most recently, Avro customers have been switched across to Octopus Energy, and Green to Shell Energy.
Ofgem also protects any existing credit you have on your account, either transferring that across to your new account or arranging a refund. If your energy bill is in debit, you will still have to pay the money that you owe.
What to do if your energy provider goes bust
Step 1: Take a meter reading and, if you can, download your most recent energy bill.
Step 2: Then, sit tight. If you usually pay via direct debit, there’s no need to cancel it just yet, and there’s no need to start trying to figure out what is the best energy provider to move to.
Step 3: You’ll be contacted by your new supplier - this should only take a few days. Have a look at your terms; it’s unlikely that they will have put you on their cheapest tariff so call them and ask to be switched across. You can also use this time to shop around for a better deal.
Step 4: If you spot a cheaper tariff from a different provider, you are free to change providers and you won’t be charged exit fees. Wondering how to switch energy providers? Our blog ‘How to set up gas & electricity in your home’ will walk you through it.
Will gas and electricity prices increase in 2021?
When a supplier collapses, Ofgem does what it can to secure the best deal; however, the new provider might charge more to cover the cost of taking on the new business. Also, it’s likely that the old provider went bust because they were offering such cheap deals, so your new tariff might be a bit of a shock to the system.
It’s always worth trawling through price comparison sites to see what’s on offer, but, to manage expectations, there are significantly fewer deals on the market at the moment. According to Which?, UK energy bills will be the most expensive yet this winter, and this is because of the increased energy price cap.
The energy price cap sets the maximum amount UK suppliers can charge customers. The cap was raised on 1st October 2021, and nearly 15 million households will be affected, some of whom’s bills will increase by 12% - as stated by the BBC. If you’re on a fixed tariff, you won’t be affected...until your contract comes to an end, and you’ll be switched to a new tariff at the new level.
If you’re struggling to pay your bills
Will the increased cost put you or someone you know in a tight spot? There are a couple of schemes out there that might be able to help:
Cold Weather Payment - between 1st November and 31st March, you could receive a payment of £25 for each 7 day period where the average temperature in your area is zero degrees celsius or lower. You do not need to apply for this benefit, if you’re eligible you’ll be paid it automatically. Eligibility criteria includes those on Jobseeker’s Allowance, Universal Credit, and others. Find out more here.
Warm Home Discount Scheme - If you’re eligible, you could get a one-off discount of £140 off your electricity bill between October and March. You might be able to qualify if you’re on a low income and meet your energy provider’s criteria. Find out more here.
A few final tips...
Whilst we’re on the topic of energy bills, have you bled your radiators recently? It’s one of the most effective ways to cut down the cost of your bill, all whilst keeping your home toasty and warm through the winter.
You’ll need a radiator key, an old towel, a rag or dishcloth and a pair of thin rubber gloves. Read ‘How to bleed your radiator: 7 simple steps’ now.
Wondering how else you could cut down your energy bill? ‘12 easy ways for renters to reduce their utility bills’ has the answers.
And lastly, do you live with housemates? If so, splitting bills and chasing payments can often make things a bit err...uncomfortable. Save yourself the hassle (and frustration) by downloading an app to take care of it. Our blog ‘5 best apps for splitting rental bills 2021’ rounds up the top contenders.
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