What do I do if my energy company goes bust?
Energy prices have been hitting the headlines. In case you’ve missed it – wholesale prices have gone through the roof, putting some energy companies out of business.
As Britain’s best value large supplier, we’re proud to be generating the right mix of wind, nuclear and solar to power the country, whatever the weather. But what do the headlines and the price rises mean for you, the customer?
Why are electricity and gas prices rising?
Last winter was long and cold in Europe and Asia. We all kept our heating on well into spring, using more gas than expected. This has left the UK's gas storage levels unusually low for this time of year. On top of that there were maintenance issues in the North Sea, less gas supply from Russia and low solar and wind generation, meaning there’s less gas to go around. This has pushed prices up by 250% since the start of the year, and 70% in August alone.
Don’t panic – your energy bill isn’t going up by 250%. But with wholesale costs this high, energy companies are struggling and have no choice but to put their prices up.
Why are energy companies going bust?
Some energy companies have been attracting customers with rock bottom prices, but pricing low and hoping wholesale costs stay the same is a gamble...
Energy companies buy their energy in advance – it’s called hedging. Buying energy in bulk in advance helps reduce risk; wholesale prices may go up and down, but if a company has already bought enough energy, they can weather the storm and walk the line between turning a profit and staying competitive.
It’s a bit like doing a big, weekly shop; you can plan ahead based on what you need, buy enough for the week and, crucially, set a budget. The other option is buying everything at the corner shop as and when you need it. It's more expensive, and you could turn up one morning to find that everything costs twice as much (or it's all gone!)
Some companies didn’t buy enough energy in advance, and now they’re facing record prices to buy what they need to supply their customers. Plus, those customers agreed to pay a specific price, which is probably a lot less than what their supplier has to pay now. Selling at a loss means losing money, and that’s how companies end up going bust.
What happens when an energy company goes bust?
First things first – you won’t get cut off. Energy companies go out of business more often than you’d think, so Ofgem put a safety net in place to keep your supply secure - the Supplier of Last Resort process.
You’ll get your energy as normal, but you’ll be moved to another supplier chosen by Ofgem. Your new supplier will write to you to introduce themselves and let you know about your new tariff. Plus, any credit on your account will be protected, so don’t worry about losing your money.
What do I need to do when my supplier stops trading?
Take a meter reading. It’ll help with your final bill for your old supplier, and means you’ll start your new account with the correct readings. You can also download your bills and check your balance to see if you’re in credit.
Apart from that, you don’t need to do anything. Your new supplier will get in touch once you’ve been moved to tell you about your new contract.
Will my power be cut off?
No, your power won't be cut off. Ofgem simply moves you to a new supplier.
Will I be put on a new tariff?
Your old tariff will probably end and you’ll be set up on a new one. Your new supplier will send you all the details, including how much you’re paying and when the contract ends. They’re not allowed to charge you an exit fee if you decide to switch, so it’s worth shopping around.
Will my energy bills go up?
Unfortunately, it’s likely your bills will go up, especially if your old supplier was selling energy too cheap. You can get in touch with your new supplier and ask to be put on their cheapest tariff. Or you can shop around to see if you can find something cheaper elsewhere. You won’t be charged an exit fee if you decide to go with a different supplier to the one Ofgem has chosen for you.
Should I cancel my direct debit?
Ofgem's advice is you don't need to cancel your direct debit. If you do you could risk building up debt.
If you’re in credit, your money is protected and your new supplier may not take any payments for a while. If you’re in debt and owe money, then then your Direct Debit payments will be taken as normal.
Will my credit move with me?
Any credit you’ve built up is protected and will either be transferred to your new account, or paid back to you. Your new supplier will let you know how they’re going to do it.
What happens if I have debt?
That depends on what your new supplier agrees with your old supplier.
If your new supplier agrees to take on customer debt, you’ll pay them as your debt will be transferred over. If that’s not what they agree then you may need to pay back your old supplier. Don’t worry – this is exactly the sort of thing your new supplier will tell you.
How can I save money and lower my bills?
In the current energy crisis, it's difficult to switch to a better tariff as there aren't many around. Traditionally, a fixed tariff would be slightly cheaper and your prices would be protected for the duration of your contract. However, at the moment, there aren't many of those around. If you're on a standard variable tariff, keep your eye on the energy market to see when better tariffs become available.
Other ways to save on your energy bills
Any other questions?
We're getting a lot of calls at the moment, so waiting times are much longer than usual. Please help us free up the lines for vulnerable customers or those in an emergency. For answers in seconds, you can check our dedicated to price rises situation page and use MyAccount or the EDF app to manage your account.
If you want to know more or have any other questions you can also visit the official Ofgem site.
If you'd like to see if you could get a better energy deal with us, view our current tariffs.