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.

Contributor

Rob Davies

The GuardianTramp

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