Energy company collapses after ban on new customers

Energy supplier Economy Energy, which was recently banned from taking on new customers, has collapsed.

The supply to the Coventry-based company’s 235,000 domestic customers will continue and any credit they have will be protected, and a new supplier will take on their accounts.

The news comes just days after Ofgem banned the company from taking on new customers until “resolved its customer service issues”.

Philippa Pickford, Ofgem’s director for future retail markets, said:“Our message to energy customers with Economy Energy is there is no need to worry, as under our safety net we will make sure your energy supplies are secure and your credit balance is protected.

“Ofgem will now choose a new supplier for you, ensure you get the best deal possible. Whilst we’re doing this our advice is to ‘sit tight’ and don’t switch. You can rely on your energy supply as normal. We will update you when we have chosen a new supplier, who will then get in touch about your new tariff.

“We have seen a number of supplier failures over the last year and our safety net procedures are working as they should to protect customers.”

The news comes just weeks after reports that Economy Energy was seeking a rescue fundraising to avoid becoming the latest in a string of companies in the sector to collapse last year.

There were a string of collapses of smaller suppliers last year, such as Spark Energy, which saw its 290,000 customer accounts acquired by rival Ovo Energy in late November. Others to have ceased trading include Extra Energy, Future Energy and Iresa.

Professor David Elmes, leader of the Warwick Business School Global Energy Research Network, said: “News that Economy Energy has ceased trading, less than a week after Ofgem prevented it taking on new customers, is more evidence that the way energy companies are expected to compete isn’t working.

“Last year we saw eight energy companies collapse and the merger between SSE and nPower fall apart. The collapse of Economy Energy shows 2019 is going to be no easier for the energy sector.

“The Government’s price cap is making it hard to run a viable retail energy business in the UK. While it’s right to ensure customers get a fair deal and good service, the government and Ofgem are struggling to support a sector that’s essential to the UK economy.”

Economy Energy was revealed in December to owe the regulator £15.5m, more than any other energy firm.

Ofgem said that 15 suppliers missed a final deadline for green taxes, totalling £58.6m.

Electricity providers who do not get enough of their energy from renewables are required to pay into the fund, which supports major green energy projects across the UK.