Usio Energy has confirmed it was threatened with a “substantial damages claim” by one of its former service providers before it ceased trading on Monday (15 October).
In a statement provided to Utility Week by Usio’s founder and chief executive Vincent Tuk, the company said it “strongly disputed” the claim and considered that it “did not have merit”.
The existence of the claim prevented Usio from “accepting the committed further funding” from its investors, the company insisted.
It said: “UESL’s management deeply regrets the current situation and remain fully committed to working with Ofgem to facilitate the transfer of its customers to a new supplier as soon as possible.”
Around 7,000 Usio customers are waiting to find out which supplier they will be transferred to under Ofgem’s supplier of last resort process (SoLR).
Ofgem said it can take up to 14 days for a new supplier to be appointed but it is looking to appoint a company “as quickly” as it can.
Usio’s statement said: “Usio customers need not worry, their supplies are secure and credit balances are protected. Usio customers will not have their electricity or gas supply cut off or interrupted.
“Ofgem’s advice is not to switch, but to sit tight and wait until the new supplier has been appointed.”
Ofgem issued Usio Energy its licence in 2016 and the supplier became active in the market in late 2017. The London-based supplier used artificial intelligence to supply customers with green energy at low prices.
Usio’s software used data from customers’ smart meters to calculate the energy the company needed to buy.
Speaking at the Ecosummit conference in Berlin last year, Tuk said Usio’s aim was to have 4 per cent of the market by 2020 – roughly 1.5 million smart metered customers.
The Energy Ombudsman has suggested the collapse of Usio Energy provides further evidence of the “instability” of some of the newer, smaller suppliers in the market.
Matthew Vickers, chief executive at the Energy Ombudsman, said: “Small suppliers have brought innovation and competition to the sector, but there is a need for checks and balances to protect consumers.
“We therefore welcome the fact that Ofgem is reviewing existing arrangements for supply market entry, exit and monitoring.”
A spokesperson for Ofgem, told Utility Week: “There are now more than 60 suppliers in the market, up from fewer than a dozen ten years ago.
“Given the changes in the retail market since then, we consider it is timely to review the current supply licensing arrangements to make sure protections against financial instability and poor customer service are adequate.”
The regulator said it will issue a consultation in November on proposed changes to the supply licensing arrangements.
Usio Energy was identified in a list compiled by Which? as offering one of the top five cheapest energy deals for August 2018.
In a recent analysis by Utility Week looking into whether cheap tariffs are sustainable, Usio Energy claimed it could offer such low prices because it took advantage of new regulations allowing it to buy energy in 30-minute slots.
The company also said a robust focus on customer service would be key to its survival.
Rik Smith, an energy expert at uSwitch and a customer of Usio Energy, posted on Twitter on Monday: “Usio have now hit the Elexon credit default buzzer – maybe it’s trickier settling half-hourly than they thought?”
Another customer said: “Disappointed by Usio Energy ceasing to trade and the first I knew of it was my direct debit being cancelled.
“Hoping Ofgem sort soon, especially with winter coming as I had a lot of credit built up ready for heating and I’m sure I’m not the only one.”
The collapse of Usio Energy has prompted predictions that other small energy suppliers could also close before the end of the year.