Ofgem should not wait for suppliers to go bust before intervening through the supplier of last resort (SoLR) process, the chief executive of Robin Hood Energy has argued.
Speaking on a panel at the Utility Week Energy Summit in London yesterday (13 June), Gail Scholes urged the regulator to take action sooner to prevent the costs of failure being spread across the industry.
“I kind of think that we shouldn’t even get to SoLR, because the industry actually knows a good six months before that an energy supplier is likely to get to that fire sale position,” she explained.
“They know because they’ve got a higher number of complaints. They’ve got failed bills. This isn’t new news and there should be an intervention that is a lot sooner in the process.”
She added: “Start looking at asking other suppliers. Who’s likely to want to pick these customers up at a reasonable price. You could sell those customers. They’ve got a value at that point. They’ve not got a value at a fire sale.
“And then all that happens with that amount of money at the end of the SoLR process is that that’s passed around the industry so all of us have to pay for it.”
Scholes said going through the SoLR process is not a pleasant experience for customers: “Normally as a retailer we get a call on Friday. So you’re working all weekend on an SoLR bid to get that into Ofgem on a Monday afternoon…
“You haven’t scaled up in your organisation to take on all those customers… So you go and get an outsource agent to come in, take the customer service calls, take up the complaints, take up the emails, of which there are loads of at that point.
“You can imagine what chaos that causes in terms of the customers’ journey. I think that there’s so much more we can do to smooth that whole journey; to prevent customers getting to that point of absolute chaos and frustration either with their new supplier or their old supplier.”
Adrian Letts, the chief executive of Ovo Energy’s retail operations, noted that many of these customers were drawn to their previous supplier by unsustainably low tariffs and therefore have “unrealistic expectations” of what the price of energy should be: “Having taken on two SoLRs, I can tell you when we have to have the conversation with the customers that we take on that we may have to put their prices up, they’re very unhappy.”
Ovo Energy was appointed as SoLR for the 235,000 customers of Economy Energy, which ceased trading at the start of the year. Ovo was the first of the challenger suppliers to reach more than one million customers, last November. The company also rescued the 290,000 customers of Spark Energy and acquired Spark’s operating group, Spark Energy Ltd.
Also speaking at Energy Summit, Alice Brett, senior policy researcher at Citizens Advice, praised Ofgem’s work to strengthen market entry tests for new suppliers, but said there needs to be “consistent” monitoring to prevent them slipping into “bad habits” over time: “I think that Ofgem need to make sure that they are quick to identify when things go wrong and step in quickly to make sure that things get put right again.”
Tougher entry tests for energy suppliers entering the market are being rolled out from this month to drive up standards for customers and reduce the risk of supplier failure.
Companies wanting to enter the market will be subject to more “stringent” tests. They will have to demonstrate to Ofgem they have “sufficient funding” and provide a customer service plan.
The regulator is also expected to launch a consultation on “ongoing requirements” for current suppliers in the market this summer.