Ofgem has called for insolvency firms to treat customers more fairly when they are left in debt when energy companies collapse.
A total of 14 small energy firms have exited the domestic energy market since 2018. Toto Energy became the seventh small supplier to go out of business this year in October - just three months after it took over customers of defunct rival Solarplicity.
In this event, a Supplier of Last Resort is appointed, and any debts to the failed company are then pursued by insolvency firms. However, these firms are not bound by energy industry regulations, and many consumers have reported being the subject of aggressive debt recovery practices.
In an open letter, Ofgem said that it expected insolvency firms “to treat energy consumers fairly” and warned that it had observed a “mixed level of service” which had led to “avoidable consumer harm”.
It said: “Ofgem does not have a regulatory role in the governance of insolvency practitioners,
however we expect them to treat energy consumers fairly.
“We expect that a responsible organisation operating insolvency services will likely have a code of practice and/or commitment to behaving ethically and treating consumers fairly. In recent years we have gained experience working with a range of different insolvency practitioners, and have observed a mixed level of service and regard for consumers, including the vulnerable.
Some practices have been very good and some have been extremely disappointing, and we believe some poor practices have led to avoidable consumer harm.”
Consumer group Citizens Advice Scotland (CAS) said that Ofgem’s letter addressed some of its “key concerns”, but warned that more must be done to protect consumers in these circumstances.
Dr Jamie Stewart, energy spokesperson for CAS, said: “We are pleased that Ofgem recognises that the current SoLR process does not always produce positive outcomes for consumers. CAS recognises that the circumstances around each supplier failure are different and, therefore, a degree of flexibility is required in terms of what remedial action is required. However, the variety of different arrangements between appointed suppliers and insolvency practitioners outlined in Ofgem’s letter highlights a need for greater consistency.
“The Citizens Advice network in Scotland helps hundreds of thousands of people each year, and many thousands of those people come to us with energy issues. Experiencing a supplier failure can be stressful for households, so it is important that they are protected from further detriment. Ofgem’s letter is step in the right direction.”