The trickle of energy retailer failures is rapidly turning into a flood. The past week alone has seen two suppliers, Extra Energy and Spark Energy, go bust. This brings to nine the total number of retailer failures over the past two years.
And Spark was the biggest so far: nearly 300,000 customers were on the Scottish Borders-based company’s books before it went out of business last Friday.
Spark’s long-suffering and predominantly low-income customers, many of whom rent off the social housing landlords that the firm targeted, probably won’t be too upset about being transferred to a new supplier.
Which? revealed this week that Spark had the worst call waiting times of any energy retailer, typically leaving customers on hold for nearly half an hour. Too often, poor customer service has proved to be a marker for subsequent failures.
Ofgem has been understandably criticised this week for being asleep at the wheel regarding new suppliers.
The regulator’s moves last week to introduce a tougher regime for licensing suppliers have been widely seen as shutting the stable door after the horses have well and truly bolted.
Ofgem has proposed that suppliers should be able to meet their customer service obligations and show they have sufficient resources to function for 12 months. To many this will sound the minimum that should have always been expected of new entrants. And in the wake of the price cap, the Klondike-like rush to enter the market has probably ended, irrespective of the new rules.
However, the failures of the energy retail market go deeper than any inaction on the regulator’s part. Ofgem has been operating within the context of a policy that saw competition as the primary route for delivering lower prices. And ministers have been happy to boast about the proliferation of new entrants even as question marks grew about how some of these companies could offer cut-price deals.
So far, the mounting body count in the retail energy market hasn’t caused any collateral damage to ministers. With their customers and liabilities being picked up by the rest of the industry, the consequences of these failures have been kept out of the limelight.
But there is only so long that any industry, especially one as under pressure as energy retailing, can be expected to swallow the consequences of clear policy and regulatory failures.