Households paid £280m bill for string of energy firm collapses

Suppliers which took on customers of failed companies allegedly sent claims totalling this amount to UK Power Networks

Big Zero Report 2022

A £280 million bill has been passed on customers to cover the cost caused by a series of collapses in the energy market.

Energy companies that were appointed by Ofgem as a “supplier of last resort” had claimed these costs created by the process of taking on customers of failed energy suppliers.

According to The Sunday Times, UK Power Networks (UKPN), the distribution network operator covering London, the South East and East of England, has been given the green light by regulator Ofgem to pass most of the £280 million in claims onto customers through an increase in tariffs that came into force in April.

Last month, Citizens Advice suggested the bill for supplier failures, including the administration costs for Bulb, was £4.6 billion.

A spokesperson for Energy Networks Association, which represents the UK’s network operators, told ELN: “Network costs have remained broadly flat since 2015. Any increase in network charges this coming year is predominantly caused by recovering significant costs of failed energy suppliers.

“Industry regulations require network operators to recover these costs through increases in their portion of the bill and pass them straight onto the supplier of last resort. This takes place on a ‘pass-through’ basis without profiting.”

In a statement, UKPN said: “We are very conscious of the increased energy prices impacting customers. Wholesale energy prices are separate from the cost of operating the electricity networks.

“Our costs are falling as a percentage of the overall electricity bill and we are proposing a 15% real terms reduction in our part of the energy bill 2023-28, while enabling increasing numbers of electric vehicles and heat pumps to help achieve net zero at lowest cost.

“Over the past 11 years we have invested over £6.4 billion in the networks, achieving better than 99% reliability, 93% customer satisfaction and were recently ranked number one company in the UK by the Institute for Customer Service.

“Operating within a regulated industry, our cost to the customer is on average £98 a year (2021/22), one of the lowest of any UK electricity distributor.”

Recent analysis suggested energy bills could hit almost £4,000 a year in January.

An Ofgem spokesperson told ELN: “Our top priority is to protect consumers, and as these costs show, when a supplier goes bust, this cost is spread across all domestic consumers.

“That is why we are making sure suppliers entering the market have robust business plans to reduce the risk of failure. We are currently reviewing how the costs of supplier failure should be recovered.”

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