Think big when you energy switch

In the last 12 months, half a dozen small energy suppliers have gone bust.

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It’s a tough world out there and all they can offer to attract attention is rock-bottom prices. That can be difficult to sustain, especially for smaller firms. There are now around 60 energy suppliers, as well as the big six, and some are very tiny. They do not have the financial resources to cope with fluctuating fuel prices, especially when they rise.

The big six firms “hedge” the price by buying in advance at fixed prices. That protects them against the wilder swings, and makes them less likely to raise prices the moment the wholesale price of electricity and gas rises significantly.

But many small suppliers do not have the resources to do that.

Energy analysts Baringa has said that it expects between five and ten small suppliers to go out of business over the winter period.

If your supplier does go bust, the regulator Ofgem finds you a new one and transfers your account.

It will also ensure that any credit balance on your account will be repaid to you. However, if your new supplier is one you don’t like – it may well be more expensive than the one that collapsed – moving before your credit is repaid could delay the refund.

If you are on a low income, there is another disadvantage in switching to a small firm.

The Warm Home Discount is £140 off one winter electricity bill. It’s available to most pensioners on Pension Credit, to some less well-off families with young children, and some people with disabilities.

Out of more than 70 suppliers, only 37 are part of the discount scheme, so switching to one of them could leave you worse off, even if the tariffs are cheaper.

When you use a price comparison website you won’t see the size of the company, but if you haven’t heard of it, the chances are it is small. For more information, visit the website gov.uk and search “warm home discount”