Citizens Advice has raised concerns about a legal challenge being brought by the administrators of failed energy companies over Ofgem’s right to claim costs as a creditor during the insolvency process.
Teneo, the administrator for Iresa Energy, along with Economy Energy liquidator Grant Thornton, are two of the companies involved in the case, which began on 17 February.
It aims to determine what sums of money can be claimed by Ofgem and by a Supplier of Last Resort (SoLR) following a supplier’s collapse.
In its response to Ofgem’s recent update to its ‘action plan’ on the financial resilience of energy suppliers, Citizens Advice policy researcher Connie Thorn said the charity had become aware of incidents where “the goals of the SoLR and the administrator may not align”, resulting in delays to customers receiving final bills and credit balance refunds.
She continued: “We are also concerned that customers going through the SoLR process can lose the protections they have in relation to debt they owe the failed supplier.
“We have seen cases of consumers being unable to keep agreed repayment plans and heavy-handed debt collection practices by some administrators.
“We’re concerned by recent reports that administrators are challenging the ability of Ofgem to put in claims for costs under the Renewables Obligation, and for the SoLR to claim for credit balances.
“It is vital that these costs can continue to be recovered from failed suppliers where possible, and if there is an unfavourable outcome in any legal case, this should be put on a firm legal footing for any future failures.”
Tim Speed, energy partner at the law firm Shakespeare Martineau, who is representing the joint administrators for Iresa, said “for some time” there has been “tension” between insolvency law and the way the energy industry operates.
He added: “Both the administrators and Ofgem have accepted that there are significant issues that need to be addressed. We have been working together with Ofgem to agree a way forward, and this case will hopefully provide a resolution that offers certainty for the currently turbulent energy industry.
“With the number of energy company insolvencies in the last 12 months, this clarity will be much needed by all parties.”
Meanwhile, Devinder Singh, restructuring partner at law firm Squire Patton Boggs, who is representing the joint liquidators for Economy Energy, said: “The applications which are before the court are neither litigious nor adversarial but are consensual.
“It is hoped that this collaborative approach will lead to a speedy resolution. All parties are acutely aware of the need for certainty, not just for the stakeholders named in the current applications but for the energy industry as a whole.”
Ofgem declined to comment on ongoing legal proceedings.