An energy firm supplying electricity and gas to nearly a quarter of a million customers has collapsed, becoming the latest in a string of casualties in the sector.
The energy regulator Ofgem confirmed on Tuesday that Economy Energy had ceased trading and urged its 235,000 customers to take meter readings and wait for a new supplier to be appointed.
The firm is the ninth small UK supplier within a year to fail, taking the total number of displaced customers to about 800,000.
The announcement was expected after Ofgem banned Economy from taking on new customers last week. The company entered credit default on Monday.
Economy Energy did not offer any apology, saying on its website: “Customers need not worry, their supplies are secure and credit balances are protected.” However, customers’ energy costs could change, depending on which provider takes over. As recently as last month, Economy had said it had “no intention of closing our doors”.
Dozens of customers have taken to review websites recently to complain that the company owes them hundreds of pounds in unreturned credit. More than 1,300 complaints about the supplier were being investigated by the Energy Ombudsman.
The collapse matters to more than just the firm’s customers, as all households bear the cost for moving customers from failed firms to other suppliers.
A Guardian analysis found that, before Economy Energy, consumers already faced a bill of at least £80m from other failed gas and electricity suppliers.
The company’s demise will add to that tally in two ways. It forces all billpayers to pay for the costs incurred by the supplier that takes on its customers, a process known as “supplier of last resort”. The firm also leaves an outstanding bill of around £13m in renewable energy subsidy payments, which will now be spread across all suppliers.
Former chief energy regulator Stephen Littlechild recently questioned the oversight of that scheme. “Prudent suppliers, and ultimately their customers, will have to bail out imprudent ones,” he said.
Observers had speculated that Economy Energy was on the rocks after it missed a payment deadline for the subsidies, and closed all its social media accounts without explanation.
Economy Energy is far from the only troubled firm among the challenger suppliers taking on the big six.
Rising wholesale prices over the past year have squeezed smaller firms, some of which do not buy energy as far in advance as the big players. Large suppliers will hedge more than a year in advance in some cases.
Future Energy, a minnow with 10,000 customers, was the first firm to fail last year, followed by One Select and its 36,000 consumers in December. The largest to collapse was Scotland-based Spark Energy, which had nearly 300,000 customers.
Economy Energy appears to have been pinched both by the wholesale increases and customer service failings.
“Unfortunately, Economy Energy didn’t get the basics right when it came to customer service, billing and payments, so when market conditions got tougher it didn’t have the solid foundations on which to continue trading,” said uSwitch.com energy expert Rik Smith.
Concerns over the financial sustainability and customer service from some new players has prompted Ofgem to discuss tougher rules and checks for new entrants.
“Ofgem’s moves to tighten up the licensing rules should address the problem of unprepared companies coming into the market. But the continued failure of suppliers shows there are firms operating that require the regulator’s urgent attention,” said Gillian Guy, chief executive of Citizens Advice.