The energy supply market is shrinking fast as providers go out of business. The closure of small suppliers is also affecting those that use companies which automatically switch households to the best available gas and electricity deal.
My family recently became one of the millions of households hit by the closure of an energy supplier when People’s Energy collapsed. It is one of ten companies – along with HUB Energy, PFP Energy, MoneyPlus Energy, Utility Point, Green, Avro Energy, Enstroga, Igloo and Symbio – which have closed since August.
I am now left with a more expensive energy deal, which wasn’t what I expected when I signed up to auto-switching website Look After My Bills (LAMB) back in 2019.
Let down: Marc Shoffman was switched to suppliers that have gone bust, leaving him with higher bills
LAMB is one of several switching services that use your energy usage data and fancy algorithms to save you time and money by automatically changing your supplier when cheaper deals become available.
The website had a strong reputation after attracting record backing of £120,000 from entrepreneurs on BBC show Dragons’ Den in 2018. A year later, it was acquired by comparison website GoCompare in a £12.5million deal.
But it has now twice moved me to energy companies which have subsequently collapsed.
AUTO-SWITCH WORKED WELL… TO BEGIN WITH
I was pleased with my first auto-switch in April 2019 when I saved the equivalent of £113.64 a year by moving from Tonik Energy to Scottish Power. That deal was due to end in May 2020 but, a month before it ended, LAMB found me a new deal with small supplier Simplicity Energy that saved me £218.65 annually.
Unfortunately, the company wasn’t around long enough for my family to fully benefit. Simplicity went bust in January this year.
Energy regulator Ofgem has a supplier of last resort scheme to manage gas and electricity supplies if a provider fails. This gives some comfort, but you still have to check meter readings and download your latest bill to check your new supplier isn’t ripping you off.
That is extra hassle, especially when you thought an auto-switching service would take all the administration away. Simplicity’s customers were taken on by British Gas Evolve and LAMB’s customer service assured me, after I complained, that ‘your next switch will be to a reputable and financially stable supplier with good customer service ratings’.
This provided reassurance when I was moved to People’s Energy in March 2021 – with the promise of an £80 annual saving. But following the collapse of People’s Energy last month, my family was back in a supplier of last resort scheme.
British Gas has taken over People’s Energy contracts, so my energy supply is assured, but my bills will rise. The standing charges and unit rates now used to calculate my bills are higher than what I was paying with People’s Energy. Calculations from comparison website Energy Helpline show that an average medium-sized household like mine, with two adults and two children, would typically pay £904 annually for gas and electricity on my old People’s Energy fixed rate tariff.
However, the British Gas People’s tariff that I have been moved to is £370 more expensive at £1,274 per year. Suddenly, I am paying more than £300 extra for my energy despite signing up with an auto-switching service to save money on my bills.
…BUT THEN THE OPTIONS STARTED DRYING UP
LAMB paused its auto-switching service a few days ago, stating it will return ‘as soon as we can access energy deals that are right for you’. That leaves me, and many other families, with a more expensive contract than before – and with no choice but to arrange our own switch if we want to get a better deal.
This comes as suppliers are increasing tariffs off the back of rising wholesale gas prices and increasing demand.
Additionally, the Ofgem price cap for default energy deals – the rates customers pay once a contract ends – rose this month by a record £139 to £1,277 a year.
Energy Helpline has warned that there are currently no fixed tariffs that are cheaper than this price cap, making it harder to find a competitive low-cost deal that locks in a decent and predictable monthly payment.
To make matters worse, I now don’t even have an auto-switching service to help me. Gareth Kloet, director of partnerships at GoCompare, says that many failed energy suppliers were not badly run – they were let down by regulator Ofgem and the level of the price cap that made it hard for them to compete.
He says: ‘The failure of these companies is a symptom of an energy market facing rising wholesale prices, the regulator not supporting them, and not having as large financial reserves.’
WILL ENERGY MARKET EMERGE STRONGER?
The auto-switching and energy comparison markets are now under extreme pressure. Rival auto-switching website Flipper exited in August due to the adverse market conditions. Another provider, Labrador, is currently advising customers to stick with their current supplier while Switchcraft says it is only putting through a handful of switches due to the limited number of deals available. It expects the market to remain quiet. Both Labrador and Switchcraft switched customers to suppliers that have failed in recent weeks.
Labrador chief executive Jane Lucy says it is important to offer customers the choice to switch to smaller challengers if they are cheaper as long as there is no risk of losing supply or credit in their account. She adds: ‘To help customers make informed choices, we publish information regularly on suppliers which may be in financial difficulty.’
Andrew Long, founder of Switchcraft, adds that there is validity in working with smaller suppliers which offer the best prices and better customer service. He adds: ‘Up until a couple of weeks ago, we hadn’t had any situation where we had switched people to a supplier that then went bust.’
Users of comparison websites are facing similar issues. GoCompare, CompareTheMarket and Uswitch have all paused their energy comparison services while prices remain so high and deals so uncompetitive.
Comparisons and switching can still be done through MoneySuperMarket and Energy Helpline, but both warn users that the number of deals has reduced.
Experts are unsure if, and when, it will be worth switching energy deals. Consumer website Resolver’s Martyn James says: ‘I was advising people to hold fire for a month while the dust settled before looking at switching options. But it now looks likely that most suppliers will have high prices for a while.’
I feel let down by Look After My Bills – they haven’t looked after me. But, hopefully, the energy market will emerge from this crisis a stronger one – with a number of financially stable suppliers which households can switch to and from to extract the best energy deal for them.
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