Small energy suppliers could be at risk

Energy regulator Ofgem has revoked URE Energy’s license to supply energy following a failure to meet its Renewables Obligation for 2017-2018 by not paying into Ofgem’s buy-out fund or presenting Renewable Obligation Certificates. These certificates are meant to prove that the supplier sourced a specified proportion of the energy it provides from renewable sources. Another energy supplier, Solarplicity has exited the market, with chief executive David Elbourne placing blame on an “overcrowded, highly regulated market” and Ofgem’s “overly onerous interventions”. Ofgem had previously pressured Solarplicity over a failure to pay into the buy-out fund. Rising customer complaints added to Ofgem’s pressure on the supplier. Ofgem banned the company from taking on new customers due to steadily decreasing customer satisfaction.

These shutdowns act as a warning to other small renewable energy businesses. Suppliers have until 31 August to pay into the buy-out fund (or 31 October with added interest). Fourteen suppliers have exited the market since the beginning of last year, and the approaching deadline could be the end for numerous others. The past nine years have seen a considerable growth in the UK energy market competition, with the number of energy suppliers growing from 12 in December 2010 to 60 in December 2018, with a peak of 70 in the early months of 2018. With increased competition, many of the smaller firms are at higher risk if they are unable to pay into the buy-out fund or prove the required proportion of renewable sourcing.

With the shutdown of Solarplicity, EDF Energy has been appointed to take on the company’s remaining customers. Ofgem’s “safety net” will be responsible for paying back these customer’s credit balances, a cost which could be offset by raising energy bills in future. This has left consumers worried about rising costs following the potential downfall of other small energy suppliers. The remaining companies in the market will be determined following the 31 August deadline.

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