Who pays for lost credit balances at failed energy companies? We all do
One detail within the hike in energy bills hasn’t received enough attention. While the surge in wholesale gas prices is, by a wide margin, the biggest driver, let’s not overlook the contribution from the cost of clearing up the mess of 29 corporate failures in the sector. Those costs also fall on customers.
The infuriating element is charges for lost credit balances – in other words, money taken from customers via direct debit that should have been in place when a supplier failed. In practice, sums have been missing in many instances. Some companies, it seems, have played fast and loose with their working capital arrangements.
Customers of the failed companies do not lose a penny when they are transferred to a new supplier via Ofgem’s “supplier of last resort” mechanism, it should be said. Instead, the missing balances are replaced, as it were, via charges on everybody’s bills. In effect, we all pay for the missing millions.
How much are we talking about? So far, not much: only £2.45 per customer (or about £54m in aggregate) was included within the £68 “supplier of last resort levy” that formed part of last week’s near-£700 hike in the price cap. The bulk of the levy covered new suppliers’ weightier costs of buying energy for customers who arrived unexpectedly.
But the full extent of the missing balances is still to emerge as numbers are reconciled with administrators’ reports and so on. By the end of the process, we could be talking about serious sums.
Chris O’Shea, chief executive of Centrica, owner of British Gas, estimated last October that almost £400m of customer credit had gone. But that was at a point when only 15 rivals had failed. The figure, almost certainly, will be higher now. If these were banks collapsing
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