With energy suppliers going bust, you may be tempted to swap

– but you’ll pay a lot more if you do, says Paul Lewis

A light bulb with a tree

Twenty-six suppliers of electricity and gas have gone bust since last summer; and by the time you read this column, the number will probably
have risen.

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If your supplier fails then your gas and electricity will continue because these suppliers do not actually supply you with anything except the bill.

Within a week or two the regulator Ofgem will have appointed a bigger firm to take over the bust firm’s customers. The new supplier does not have to honour the deal you were on. It will sell you fuel at the current rate, which is capped by Ofgem, and your bill will rise to that level.

However, the cap is currently well below the wholesale market price, so your new supplier will make a loss. In the end that is refunded to the firm by the regulator, paid for out of a levy on all suppliers, which ultimately we pay: it’s estimated to have added £95 a year to our bills already.

If you were in the middle of switching or had just switched when your supplier failed, you will not be taken over by the appointed firm.  However, your credit – and most of us have a credit, thanks to the daft way bills are calculated quarterly but paid for monthly – does not follow you: it’s the appointed supplier that has the responsibility to pay it to you, which can take a long time. Contact that firm with your
details, and if it takes too long put in a formal complaint and refuse to close it until you are refunded.

These failures are due to the policy of letting the market run free, so firms could undercut each other and customers could save money by switching. But half of energy users have never switched, and those who have usually find the first switch saves them money, but subsequent changes save them very little.

If you switch now you will pay a lot more for your energy, so no one is doing it. And in April the cap will rise again to reflect the rising cost of gas, and bills could go up 50 per cent.  For most of us, the best we can do at the moment is sit tight and put on another jumper.

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Paul Lewis presents Money Box on Radio 4. 

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