Failed energy suppliers left the market owing the Energy Ombudsman more than £1.6 million in 2019, resulting in the service shifting costs onto other retailers.
In a letter seen by Utility Week dated 28 January Matthew Vickers, chief executive at the Energy Ombudsman, reaffirmed proposals from last year to recover costs through its charging structures.
Bad debt from failed suppliers resulted in the service being owed £1.67 million (1.39 million excluding VAT).
However, higher-than-expected case volumes and further efficiencies within the service, mean it is only seeking to recover £650,000.
“The sector has come under increasing financial pressure from multiple directions. There have been several supplier failures and the Energy Ombudsman continued to fulfil its duties and take on additional work in supporting both consumers and providers through turbulent times”, Vickers said.
He added that non-payment of case fees by failed suppliers has had a “significant and severe” impact on the service’s funding model.
The Ombudsman said it had looked at whether to suspend services to particular providers or expel them from the scheme. Legal advice sought by the service clarified it could not.
In 2018 the service absorbed the full £1.3 million of bad debt cost for that year by meeting it with its reserves, an approach which Vickers described as not sustainable.
As a result it is spreading the cost among existing suppliers in quarterly payments, apportioned according to each supplier’s usage of the Energy Ombudsman scheme over the last two years.
Vickers stressed that the service continues to take “assertive action” on unpaid charges and has this month begun legal proceedings against one supplier for failed payment.
An industry source has expressed their anger at regulator Ofgem for not paying the cash owed, but added they had sympathy with the Ombudsman and was not criticising its actions.
The source said: “If a corner shop went bust, the council cannot approach Sainsbury’s and ask them to pay its council tax. It’s up to the regulator to make sure bills are paid, not competitors.”
Responding to the comments, an Ofgem spokesperson said it was not within the regulator’s remit to make the payments.
This is not the first time the Energy Ombudsman has raised concerns about failed suppliers.
Last April the service highlighted issues with the supplier of last resort (SoLR) process in that while it ensures the continuity of energy supply for consumers and protects outstanding credit balances, it does not cover complaints to the Ombudsman.
A spokesperson added at the time: “This means that 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.”