Ofgem prepares for looming failure of a leading energy supplier

Energy regulator understood to have put City firm Teneo on standby to act as ‘special administrator’

A City firm has been put on standby to take control of a large energy company amid fears that one could collapse soon, overwhelming the existing safety net put in place by the regulator, Ofgem.

The management consulting company Teneo is understood to have held talks with the regulator about acting as “special administrator” under a government scheme, as yet untested, for handling large energy company failures.

In theory, the company would take on the operations of a failed energy supplier to ensure no interruption of service or supply to customers.

The backup option, first reported by Sky News, is being readied in light of mounting concern that Ofgem’s “Supplier of Last Resort” system, under which a healthy energy supplier agrees to take on customers from a collapsed rival, is at breaking point.

Three more energy companies collapsed on Wednesday, taking the total number of failures to 12 this year, in a deepening crisis that has forced Ofgem to find new providers for more than 2.2m customer accounts.

The record gas prices that triggered the wave of collapses also make it less attractive for surviving suppliers to take on these customers.

This is because the energy price cap means they are effectively being asked to acquire customers who will be paying less than the current price of gas.

While suppliers can ultimately claim their costs back – via an industry levy – some of these companies are rumoured to have sought legal advice about how to skirt their obligations under the last-resort regime.

A spokesperson for Ofgem declined to comment specifically on whether Teneo had been lined up as a special administrator.

They said: “Ofgem and government prepare for a wide range of scenarios and have longstanding contingency plans in place for any situation as needed. These processes include speaking to a range of organisations.”

Teneo did not respond to requests for comment.

The customer transfer system is also leading to higher bills for households whose accounts are transferred.

A report by Citizens Advice, published on Thursday, found that consumers who are moved to a new supplier typically pay £30 a month more than before.

Advisers at the charity warned that many will face fuel poverty this winter and could end up turning off their fridges and freezers, relying on hot-water bottles for warmth and requesting support to buy extra duvets and blankets.


Rob Davies

The GuardianTramp

Related Content

Article image
Together Energy is latest UK supplier to go bust
Ofgem will appoint new firm to take on 176,000 households affected by collapse of Bristol Energy owner

Jillian Ambrose Energy correspondent and Richard Partington

18, Jan, 2022 @5:32 PM

Article image
Ofgem tells energy firms: 'one last chance'
Energy regulator's ultimatum gives 'big six' firms two months to reform or face a full-scale competition commission inquiry

Tim Webb

21, Mar, 2011 @8:40 PM

Article image
Ed Miliband's energy price freeze means the end for Ofgem

Current regulator lacks muscle to stand up to the big six energy suppliers and must be changed

Nils Pratley

24, Sep, 2013 @6:22 PM

Article image
Ofgem blamed for errors that led to energy firms collapsing
Citizens Advice says regulator failed to act over rule-breaking suppliers, leaving households facing steep bills

Jillian Ambrose Energy correspondent

09, Dec, 2021 @12:01 AM

Article image
Drop in wind energy costs adds pressure for government rethink
Tories urged to look at onshore windfarms which can be built as cheaply as gas plants and deliver the same power for half the cost of Hinkley Point, says Arup

Adam Vaughan

23, Jul, 2017 @5:03 PM

Article image
Ofgem seeks tougher price controls on energy firms
Plan would hit gas and electricity networks’ returns and save £5bn for consumers, says watchdog

Angela Monaghan

07, Mar, 2018 @4:56 PM

Article image
Ofgem: UK cannot trust energy companies to keep the lights on

Regulator says free market approach will leave UK short of energy supplies by 2015

Tim Webb

03, Feb, 2010 @8:37 PM

Article image
Spark Energy collapse leaves 290,000 without supplier
Fears other challengers will fold amid tough competition and rising wholesale costs

Adam Vaughan

23, Nov, 2018 @5:56 PM

Article image
Ofgem 'failed to act' on gas price-fixing warning

Energy watchdog confirms it was tipped off about possible manipulation of wholesale market on 17 October

Terry Macalister, energy editor

21, Nov, 2012 @10:13 PM

Article image
Nottingham-based energy supplier fails to pay £9.5m in subsidies
Robin Hood Energy may have licence revoked if it fails to pay total sum to Ofgem

Jillian Ambrose

01, Oct, 2019 @2:03 PM