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| GB Energy customers: what happens now? GB Energy customers: what happens now? | |
| (about 7 hours later) | |
| On Saturday domestic gas and electricity supplier GB Energy announced it was ceasing to trade. The move leaves 160,000 customers in limbo. What happens next for them – and rest of us | On Saturday domestic gas and electricity supplier GB Energy announced it was ceasing to trade. The move leaves 160,000 customers in limbo. What happens next for them – and rest of us |
| Why has GB Energy collapsed? | Why has GB Energy collapsed? |
| None of the small “challenger” energy firms that supply gas and electricity actually produce it – instead they buy it on the wholesale market, add a margin, and sell it on to customers, usually via one of the price comparison websites. | None of the small “challenger” energy firms that supply gas and electricity actually produce it – instead they buy it on the wholesale market, add a margin, and sell it on to customers, usually via one of the price comparison websites. |
| Since launching three years ago, GB Energy had been offering some of the cheapest tariffs in order to grab market share. It gathered 160,000 customers relatively quickly. | Since launching three years ago, GB Energy had been offering some of the cheapest tariffs in order to grab market share. It gathered 160,000 customers relatively quickly. |
| The problem is that the management were caught out by wholesale prices rises. The company, which Guardian Money had expressed reservations about this time last year, was not forward-buying enough of its energy and was therefore vulnerable to wholesale price rises. Ultimately, it was probably supplying energy to some households for less that it was paying its suppliers. | The problem is that the management were caught out by wholesale prices rises. The company, which Guardian Money had expressed reservations about this time last year, was not forward-buying enough of its energy and was therefore vulnerable to wholesale price rises. Ultimately, it was probably supplying energy to some households for less that it was paying its suppliers. |
| Many in the industry have been predicting that a small supplier would go bust in exactly this way. It remains to be seen whether any other small suppliers with similar business models will follow suit. | Many in the industry have been predicting that a small supplier would go bust in exactly this way. It remains to be seen whether any other small suppliers with similar business models will follow suit. |
| What happens if I am a GB Energy customer? | What happens if I am a GB Energy customer? |
| Nothing yet – your lights and central heating will continue to come on as if nothing had happened. Behind the scenes, the energy regulator Ofgem is currently in negotiations to appoint what is known as a “supplier of last resort”, a company to which all GB Energy’s customers will be moved en-mass, probably sometime next week. | Nothing yet – your lights and central heating will continue to come on as if nothing had happened. Behind the scenes, the energy regulator Ofgem is currently in negotiations to appoint what is known as a “supplier of last resort”, a company to which all GB Energy’s customers will be moved en-mass, probably sometime next week. |
| Last month the regulator rather fortuitously announced it had put in place a safety net to guarantee that any customer who had built up a big credit balance with their supplier won’t lose out. | Last month the regulator rather fortuitously announced it had put in place a safety net to guarantee that any customer who had built up a big credit balance with their supplier won’t lose out. |
| Domestic energy customers can often be hundreds of pounds in credit at this time of the year, ahead of the peak winter usage period when bills are much higher. Ofgem is looking to appoint a supplier that will in effect honour any credit that GB Energy customers have built up – in return for effectively scooping 160,000 customers. | Domestic energy customers can often be hundreds of pounds in credit at this time of the year, ahead of the peak winter usage period when bills are much higher. Ofgem is looking to appoint a supplier that will in effect honour any credit that GB Energy customers have built up – in return for effectively scooping 160,000 customers. |
| This looks a tall order given the liability – if half its customers were £300 in credit this equates to £24m. If no supplier will take on the liability, then a levy will be placed on all suppliers to fund this sum, equal to around £1 a household. | This looks a tall order given the liability – if half its customers were £300 in credit this equates to £24m. If no supplier will take on the liability, then a levy will be placed on all suppliers to fund this sum, equal to around £1 a household. |
| Affected GB Energy customers who have not yet taken meter readings should do so. Ofgem will manage the transfer behind the scenes, and has confirmed that no customer will lose out as a result of this. | Affected GB Energy customers who have not yet taken meter readings should do so. Ofgem will manage the transfer behind the scenes, and has confirmed that no customer will lose out as a result of this. |
| Will GB Energy customers’ bills rise as a result? | Will GB Energy customers’ bills rise as a result? |
| Almost certainly. The deal to which GB customers will be moved is unlikely to be one of the cheapest on the market. Most likely it will be on the chosen energy supplier’s standard tariff, which typically cost around £1,100 a year for average consumption – around £250 a year more than the cheapest deals out there. | Almost certainly. The deal to which GB customers will be moved is unlikely to be one of the cheapest on the market. Most likely it will be on the chosen energy supplier’s standard tariff, which typically cost around £1,100 a year for average consumption – around £250 a year more than the cheapest deals out there. |
| There is nothing to stop customers then moving supplier from Ofgem’s chosen firm, but the advice is to wait until the “last resort” switch has taken place, particularly if you have a credit balance as you could lose that by switching directly now. | There is nothing to stop customers then moving supplier from Ofgem’s chosen firm, but the advice is to wait until the “last resort” switch has taken place, particularly if you have a credit balance as you could lose that by switching directly now. |
| I’m with a small supplier – is mine at risk? | I’m with a small supplier – is mine at risk? |
| It could be. The challenger suppliers do well when wholesale prices fall, but struggle when the opposite happens. The last supplier to go bust was Energy4Business, which collapsed in 2008. In the past few years wholesales prices have been on the side of the small suppliers, but over the past 12 months they have gone up around 50%, albeit from a very low base, and there will be some very nervous finance directors at a number of smaller suppliers this morning. | It could be. The challenger suppliers do well when wholesale prices fall, but struggle when the opposite happens. The last supplier to go bust was Energy4Business, which collapsed in 2008. In the past few years wholesales prices have been on the side of the small suppliers, but over the past 12 months they have gone up around 50%, albeit from a very low base, and there will be some very nervous finance directors at a number of smaller suppliers this morning. |
| Seasoned industry expert Doug Stewart, who runs supplier Green Energy UK, says he fears the collapse could be the first of many, if there is a harsh winter. “The closure of GB Energy is as a result of loss-making tariffs coming home to roost. You can’t make losses without having cash to cover them, and when that cash is coming from upfront payments made by customers, the whole pack of cards comes tumbling down when growth slows or stops. There’s nothing left in the bank to pay the creditors, and the customers’ money is all gone,” he says. | Seasoned industry expert Doug Stewart, who runs supplier Green Energy UK, says he fears the collapse could be the first of many, if there is a harsh winter. “The closure of GB Energy is as a result of loss-making tariffs coming home to roost. You can’t make losses without having cash to cover them, and when that cash is coming from upfront payments made by customers, the whole pack of cards comes tumbling down when growth slows or stops. There’s nothing left in the bank to pay the creditors, and the customers’ money is all gone,” he says. |
| Should I switch supplier to a ‘big six’ operator? | Should I switch supplier to a ‘big six’ operator? |
| Technically there is no reason to avoid the challenger suppliers, as if yours goes bust, you as a consumer won’t lose out. That said, lots of switching households will be even less keen now to switch to a firm they have never heard of. The cheapest current average dual fuel deals cost around £850, but few buyers will have heard of the suppliers. | Technically there is no reason to avoid the challenger suppliers, as if yours goes bust, you as a consumer won’t lose out. That said, lots of switching households will be even less keen now to switch to a firm they have never heard of. The cheapest current average dual fuel deals cost around £850, but few buyers will have heard of the suppliers. |
| With the cheapest big six supplier tariffs now costing around £880-£890, many buyers will decide that the extra cost of moving to an established firm could be worth paying. | With the cheapest big six supplier tariffs now costing around £880-£890, many buyers will decide that the extra cost of moving to an established firm could be worth paying. |