The energy supplier failures since January 2018 could see customers pick up a bill for £172 million, according to research by Citizens Advice.
It suggests customers will “pay the price” for the collapse of 11 energy companies as industry bills have been left unpaid.
The consumer advocate also highlighted that thosands of people who owed money to the failed companies have faced “aggressive” debt collection practices and been left without consumer protections.
Industry bills include renewable generation, infrastructure costs and metering costs.
Consumers are likely to have to cover the estimated £172 million costs through their energy bills.
Citizens Advice also estimates that at least 32,000 people have been left open to potentially aggressive debt collection practices by the administrators who took over these companies.
When energy suppliers fail, Ofgem’s supplier of last resort (SoLR) process appoints a new supplier for customers to ensure a continued energy supply, while the old supplier is taken over by administrators.
Administrators are not bound by the same rules as suppliers licensed by Ofgem.
“This means they can pursue debts much more aggressively than usually allowed and customers can see the amounts they are being chased for go up overnight,” Citizens Advice claimed.
It said customers, including those in vulnerable circumstances, can be contacted by debt collectors and asked for sums they cannot afford at “very short notice”
Since the start of last year Citizens Advice has helped more than a thousand people with debt issues related to failed suppliers, with average debts of £250.
It has called on the government to use the forthcoming energy white paper to fix the “protection gap” for customers who owe money to energy suppliers when they collapse.
Citizens Advices says it wants the government to “take action” to make sure administrators of all energy companies have a duty to consider consumer interests and follow the same rules as suppliers.
It is also calling for legislation to ensure more regular payment of industry costs – in particular the Renewables Obligation (RO) – by suppliers, to stop the build up of big debts that are then paid by consumers.
Gillian Guy, chief executive of Citizens Advice, said: “Consumers shouldn’t have to foot the multi-million pound bill left behind when companies collapse – and they certainly shouldn’t lose their usual protections in the process.
“The energy white paper is the perfect opportunity for the government to close the gap in protections and limit the cost to consumers of any future supplier failures. It must act now.”
In response to the findings Ofgem pointed towards its tougher licensing rules for new suppliers, which came into force this month.
Philipp Pickford, Ofgem’s director for future retail markets, said: “Competition in the energy market has helped to drive down prices for consumers.
“Ofgem introduced new tests this summer for companies applying for a licence to supply energy, to help drive up standards, ensure they meet their industry obligations and reduce the risk – and cost – of supplier failure.
“Ofgem will also consult in the autumn on tougher rules for existing suppliers.”
She added: “Under Ofgem’s safety net, if a supplier fails the energy supply and credit balances of its customers are protected. We agree with Citizens Advice that this process has generally worked well and we are looking at ways of improving the experience of these customers when they are transferred to new suppliers and to reduce costs associated with supplier failure.”
Energy UK backed Citizens Advice’s call for customers to receive the same protections if an administrator has to be brought in when a company fails.
Director of policy, Audrey Gallacher said: “It’s essential to have this safety net for customers but at the moment it’s being triggered far more than was ever intended. This means customers potentially footing the bill for as much as £172 million as result of suppliers exiting the market because of unsustainable business models, often after performing badly with their customer service.
“It’s a particular concern that, as Citizens Advice points out, administrators taking charge of failed companies are not required to treat indebted customers with the same consideration as suppliers. So we fully support their call for existing consumer protection requirements to be extended to administrators.
“The increase in competition and the number of suppliers in recent years have been great for customers in providing choice and driving down prices. But we welcome Ofgem bringing in tougher checks for suppliers entering and operating in the market to ensure they have sustainable business models and are adequately financed to serve their customers.”
She added: “Ofgem now needs to ensure that the ongoing operation of companies is monitored to minimise the risk of additional costs being loaded on to consumers.”
Matthew Vickers, chief executive at the Energy Ombudsman, said: “Ofgem’s supplier of last resort process has many positive features and acts as an important safety net for consumers.
“Despite this, it’s true that the collapse of an energy supplier can sometimes lead to problems and stressful situations for its former customers.
“It’s worrying that consumers, including those in vulnerable circumstances, are facing aggressive debt collection practices at the hands of administrators. Such cases fall outside our remit.
“From our perspective, we are concerned that the SoLR safety net doesn’t cover complaints that are escalated to us as the ombudsman.
“If a consumer complains to us about a supplier that subsequently ceases trading, there is no formal mechanism that enables the complaint to be resolved or the consumer to receive redress.
“We have raised this particular issue with Ofgem and our two organisations are working together in a positive and collaborative way in order to identify a solution that best serves the interests of consumers.”
Three energy suppliers have exited the market so far this year – Economy Energy, Our Power and Brilliant Energy.