More than half-a-million homes have now been hit by the collapse of nine small-name energy firms since November 2016
On Monday, OneSelect became the eighth energy minnow to go bust in 2018, leaving its 36,000 customers in limbo.
It means that more than half-a-million homes have now been hit by the collapse of nine small-name energy firms since November 2016, according to watchdog Ofgem.
Yet increasing numbers of households continue to switch away from the largest six providers to save on their bills — almost five million have switched to smaller suppliers this year alone.
Today, households have more than 70 energy suppliers to choose from, but newcomers typically offer the best deals.
This is often because they have lower running costs and do not have to pay towards expensive government schemes.
However, as they cannot buy as much power in advance, they are more vulnerable to sudden increases in wholesale prices.
Experts say this means that if wholesale prices continue to rise, we could well see more smaller firms cease trading.
For many customers, the savings available will be well worth any risk that the firm may collapse.
Iresa, for example, was charging only £884 per year in some parts of the country two months before it ceased trading in July — that’s £273 less than E.On, according to Iresa’s website.
Utility Point currently offers the cheapest deal on the market, with the average household paying only £903 per year.
By comparison, the cheapest energy deal with Big Six supplier British Gas is £1,052 per year, according to comparison site uSwitch — £149 more expensive than Utility Point.
But experts say customers should be wary of choosing a supplier based on price alone, and encourage families to also check the customer service ratings, which can indicate how companies are coping.
Should I swap to a big supplier?
experts urge households not to panic. Emma Bush, of comparison site uSwitch, says many small suppliers are well-run, so you are not automatically at risk.
She adds: ‘If any supplier does cease trading — large or small — Ofgem’s safety net protects credit balances and ensures security of supply.’
How can i check if a firm is safe?
IF you are thinking of moving to a small supplier, customer service ratings are usually a good indicator of how well the business is doing.
Huge choice: Today, households have more than 70 energy suppliers to choose from, but newcomers typically offer the best deals
Citizens Advice rates energy firms based on a number of factors, including how easy they are to contact and the amount of consumer complaints they receive. It publishes a league table every three months on its website.
In its latest review of the energy market, published in September, OneSelect came bottom, scoring 1.3 out of five.
You could also try checking review sites such as Trustpilot, and some comparison sites also publish ratings.
In November, Ofgem announced tougher tests for new suppliers applying for a licence, to improve standards.
Firms will have to demonstrate to the state regulator that they have enough money and resources to manage the business for at least 12 months.
Ms Bush, of uSwitch, adds: ‘A handful of suppliers entered the winter period with little room for manoeuvre.
‘Unexpectedly high demand, thanks to the cold weather caused by the Beast from the East, has helped push up commodity costs, while switching volumes have reached near-record levels.
‘But being a smaller energy firm doesn’t automatically mean they are financially unstable — many are very well run, strongly performing businesses.
‘The key thing to check out, apart from how much you’ll pay, is what people say about the company. If other customers are satisfied, then that’s usually a signal of a well-run company.’
Increasing numbers of households continue to switch away from the largest six providers to save on their bills — almost five million have switched to smaller suppliers this year alone
What if it does close down?
Sit tight. You do not need to do anything until you have been transferred to a new supplier. Ofgem will step in and appoint a new firm to take on the defunct business’s customers.
This is called a ‘supplier of last resort’ and it usually takes a few days for Ofgem to pick one.
When deciding which firm to choose, it will look at the prices of the deals it offers, customer service levels and what systems it has in place to cope with an influx of thousands of new customers. The new supplier will be in touch to let you know. Do not to try to switch to another firm before the transfer is complete. This should take no more than two weeks after you are contacted.
If you do not wait, the switch could take longer or not go through at all, causing you extra hassle.
Will I lose my power supply?
No. Be assured that Ofgem says there will be no disruption to your power and that you will not notice any change apart from being contacted by a new supplier. The lights and heating will stay on.
What about my credit surplus?
When you pay by monthly direct debit, you typically build up a surplus credit over the warmer months, which is then used up over winter when you have the heating on more.
Many small suppliers also bill you in advance, which means you are almost always in credit.
In 2016, Ofgem introduced new rules to ensure these credit balances are protected in the event a supplier goes bust.
The rules dictate any credit should be transferred to your new provider to offset future usage. If you switch away, it will be refunded.
The new firm will contact you to explain how to get your money back. Take a meter reading and note your account balance in the meantime.
Will I pay more after moving?
There is a good chance you’ll be moved on to a more expensive deal. This reflects the risk taken on by the new supplier, for example having to buy additional wholesale energy at short notice for its new customers.
Once you have been transferred, ask the firm to put you on its cheapest tariff and compare deals with other suppliers. If you leave, you will not be charged exit fees.