An overview of what is driving the current increase in UK energy administrations and what being caught in an energy administration means for consumers.
The recent increase in wholesale global gas prices has had an impact on the cost of energy in many countries. The main factor driving these price increases has been the Russian invasion of the Ukraine. Russia is the world’s biggest exporter of natural gas and around three-quarters of these exports have traditionally gone to Europe and Turkey.
European efforts to move away from dependence on Russian oil and gas since the war, and a simultaneous increase in demand for oil and gas from Asia, have created a supply and demand crisis. This is driving the substantial price hikes to UK household’s energy costs.
Wholesale gas prices were already under pressure prior Russia’s invasion of the Ukraine. An unusually cold winter in Europe and Asia had depleted stocks and a perfect storm arrived in the form of a summer heatwave in Europe, US and Asia and drought in Latin-America. This meant energy demand remained high whilst the production of wind power in the Europe and hydro-electric power in Latin- America both fell due to the climate conditions.
These are unprecedented times and consequently we have seen a significant number of UK energy suppliers entering administration and exiting the market.
Below we answer some of the common questions consumers ask when they find themselves in an energy administration.
What does an energy company entering administration mean for its customers?
A company administration is a formal insolvency process. When a company is no longer financially viable, and therefore must cease to trade, an administrator is appointed to help rescue any viable elements of the business, reduce any ongoing costs, and secure returns for any people or businesses to whom the company owes money.
If an energy supplier goes out of business Ofgem’s safety net ensures its customers will always have an energy supply and protects their credit balances. In most cases Ofgem will appoint a new supplier to take on the company’s customers. In exceptional circumstances, an administrator might be appointed to run the existing supplier.
Customers have a choice whether to stay with the supplier appointed by Ofgem or switch to a supplier of their choice. It is critical to wait until the new supplier is appointed before starting to switch though as this will ensure your credit balance is protected.
Why do debt collection agencies get involved with energy administrations?
Debit balances are usually forwarded to a debt collection agency for recovery – so it is not uncommon for customers in an energy administration to find themselves in a debt collection process.
The debt collection agency is appointed by the administrator to recover any monies owed to the business so it can settle its debts with its creditors. These creditors could include other business which have provided it with a service or sometimes even the employees who have not been paid. The recovery of these monies is critical to ensure as many people as possible receive the money they are owed.
What can customers do if they believe their final bill is incorrect?
The administration process is complicated, so it is not unusual for final bills to be based on estimates or for payments to occasionally be misallocated. If you have a query over your final bill, get in touch with the debt collection agency and explain your concerns. It is the debt collection agency’s job to investigate any queries regarding final balances and they usually have the ability to make amends / recalculate bills based on information supplied by the customer.
Why are some customers asked to provide evidence of a payment made?
In the process of entering administration some records may be lost and some payments incorrectly allocated. A debt collection agency may have access to all the billing history for your account or have merely been provided with final bills. It can vary greatly between administrations.
By providing evidence of payment (screen shots from your online bank or bank statements) the debt collection agency can immediately allocate any missed payments ensuring you are only asked to pay exactly what you owe. This will ensure your account can be swiftly closed and you will come out of the debt collection process.
If a bill is based on an estimated read, do you have to pay it?
In the absence of an actual read it is industry standard to use estimated reads to calculate bills. These estimates are based on your historic usage so should be a relatively accurate estimation of what energy you have used and what you owe. However, to guarantee billing accuracy it is always best to submit regular actual reads to your energy company.
As soon as you have notification that your energy company is going bust take actual reads and a date stamped photo of the meters.
What will happen to any consumers who choose not to settle their final bill?
The debt collection process will continue until the debt is settled. This will include more emails, calls and letters. The company might decide to take your case to court, and they can also choose to highlight the non-payment to credit reference agencies. Both these events could affect your ability to secure credit in the future.
It is also important to remember that if you have used the fuel you are obliged to pay for it. Unfortunately, the number of UK energy insolvencies is already predicted to have an impact on already escalating fuel costs – those that try to avoid paying, will be increasing the burden on those that do settle their bills.
Ashley Barratt – CEO Barratt Smith Brown
Leicester based Barratt Smith Brown, has established a strong reputation for providing market-leading debt collection support to the utilities sector. Leveraging CEO Ashley Barratt’s 15 years of experience at Centrica, they have not only provided outsourced support to key industry players such as Business Stream, Bristol Energy and Shell, but have taken a lead role in managing collections for UK energy administration collections – handing over 75% of energy administration cases since 2018. Their expertise in energy administrations led to their key role in helping The Citizen’s Advice Bureau develop their Supplier of Last Resort – Good Practice Guide.