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‘Should I trust new and unknown energy firms to supply my home?’

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Written by: Paloma Kubiak
09/03/2017
With a number of new, small energy companies offering cheaper tariffs than the big providers in the market, should you trust them and what are your rights if things go wrong?

While many households may be more familiar with the ‘Big Six’ energy companies – British Gas, EDF, E.ON, Npower, Scottish Power and SSE ­­– the energy regulator, Ofgem, has seen an increase in applications from small, independent suppliers.

Official statistics reveal Ofgem awarded a total of 73 gas and electricity licences to domestic suppliers in 2015, while in 2016, the number rose to 80.

A number of smaller suppliers have already sparked competition in the industry and made a reputable name for themselves, such as First Utility with a number of cheapest annual dual fuel tariffs.

But providers such as Iresa Limited, Tonik, Affect Energy and So Energy etc are names you may not have heard of before so it’s natural to question whether it’s safe to switch to them.

Claire Osborne, energy expert at comparison site uSwitch.com, said: “Within the last ten years we’ve seen a surge in the number of providers competing to supply households with their energy – leading to a wide range of new smaller suppliers, whose names many people don’t recognise, offering cheap energy deals.

“Our experience is that the standards of service provided by smaller suppliers can vary significantly, while some are beating large suppliers on customer service, others leave much to be desired. It is therefore all the more important that consumers use sources available, such as comparison sites, to help them make an informed decision as to which supplier is right for them.

“It is also worth noting that you should consider more than the headline price when comparing energy suppliers – checking the length of your fixed rate deal or the exit fee the supplier may charge if you decide to leave before that deals ends to make sure you get the best deal possible from the supplier you choose.”

New supplier licence checks

When granting a new supplier licence, Ofgem carries out a number of checks, such as requesting details of the company’s ownership structure and checking if any of the directors involved have been disqualified.

It also undertakes verification checks on the information provided, the applicant and/or holding company and considers how the applicant will commence supply.

It’s important to note that since 2008 only two energy companies have gone into administration, most recently in November 2016, 160,000 customers of GB Energy were affected when it ceased trading amid increased wholesale costs.

Ofgem has also recently confirmed it will be reviewing its approach to awarding supply licences, the financial requirements on suppliers and how it monitors performance, later in the year as a result of the increased number of small energy suppliers and rising wholesale prices.

Ofgem says: “We have had many representations from those who consider we should require companies to meet more significant financial tests both before and after receiving a licence.

“We are conscious also of the benefits that consumers derive from the competition that new entrants can bring.

“It’s right that we look at this as a prudent regulator. But it’s possible that we will not make any changes following this review.”

Your rights if things go wrong

As part of the regulator’s safety net for customers should things go wrong, if an energy company goes bust you’ll continue to have an energy supply and your credit balance will be protected.

If your energy company does go into administration, it’s important to note down meter readings ready for when a new energy company is appointed to supply your property. Once a new supplier’s been found, your old tariff ends and you’ll be put on a new contract with the new supplier – though it could be more expensive than the existing deal you were on. However, you can switch at any time.

How to complain about your energy provider

Away from administration rights, if you have a complaint about your new energy supplier you should raise it with the firm in the first instance, explaining what the problem is and how you would like it to be resolved.

Gas and electricity suppliers have to adhere to a complaints handling code of conduct which means they have up to eight weeks to deal with your complaint.

If you’re not happy with the response or get no response, you should take your complaint to the Energy Ombudsman.

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