Spark Energy becomes seventh energy company to go bust this year

Published by Stephen Little on 26 November 2018.
Last updated on 26 November 2018

Energy

Spark Energy has become the seventh energy company to cease trading this year, leaving 290,000 customers without a provider.

Ovo Energy has confirmed it is in talks to buy the Selkirk-based gas and electricity firm which employs more than 300 staff.

Spark Energy blames the collapse on the “increasingly tough trading conditions in the energy industry”.

The news comes after the collapse of Extra Energy last week, which has 108,000 customers.

What to do if you are a Spark Energy customer

Energy regulator Ofgem says that the energy supply of Spark Energy’s customers will continue as normal and that an outstanding credit balances will be protected.

It says it will choose a new supplier to take on Spark Energy’s customers as quickly as possible. This supplier will contact these customers shortly after being appointed.

However a spokesperson for OVO Energy tells Moneywise: "OVO Energy can confirm it has entered into a conditional agreement to buy the operating company of Spark Energy, and iy has also submitted a proposal to Ofgem to take over their customers.

"We have been working with the management team in Selkirk to ensure Spark Energy jobs will be protected and customers' services will not be disrupted."   

Mary Starks, Ofgem’s executive director for consumers and markets, says: “Our message to energy customers with Spark 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.

 “Although we have seen a number of supplier failures this year, our safety net procedures are working as they should to protect customers.”

In the meantime, Ofgem is advising customers of both Extra Energy and Spark Energy not to switch to another energy supplier, and take a meter reading, ready for the new supplier.

Concerns

The failure of Spark Energy raises concerns about other challenger energy providers and their ability to cope with the pressure of rising wholesale costs.

Last week, Ofgem launched investigations into Spark Energy and Economy Energy over non-payment of their renewable power obligation. Ofgem also said that URE Energy and Eversmart also failed to pay on time.

Under the government’s renewables obligation schemes, suppliers who do not source the required proportion of electricity from renewable sources have to pay into a buy-out fund administered by Ofgem.

According to the regulator, there is a shortfall of £58.6 million in renewable energy subsidies from challenger suppliers after missing the 31 October deadline.

Energy suppliers are coming under increasing pressure from rising wholesale energy costs and growing competition. The market has also been hit by increased regulation, including a cap on standard variable tariffs set to be introduced from January next year.

Other companies that have gone bust include, Iresa Energy, Future Energy, Usio Energy and Gen4U.

Last week, Ofgem announced it was tightening licensing rules for new energy suppliers that join the market.

Under the new rules, companies will have to demonstrate they have adequate financial resources and can meet their customer service obligations before they are allowed to supply energy.

UK energy suppliers which have ceased trading since 2016

Supplier Residential / business Estimated number of customers Date ceased training
GB Energy Residential 160,000 Nov-16
Future Energy Residential 10,000 Jan-18
GEN4U Residential 1,000 Jul-18
Iresa Energy Residential 95,000 Jul-18
National Gas & Power Business 80 Jul-18
Ephase Energy (entered administration) Residential 20 Aug-18
Usio Energy Residential 7,000 Oct-18
Extra Energy Residential / Business 129,000 (Domestic 108,000, Business 21,000) Nov-18
Spark Energy Residential 290,000 Nov-18

Source: uSwitch, November 2018

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Ofgem has failed in its

Ofgem has failed in its duties to ensure the companies wanting to join the Energy market have the financial
infrastructure and resources to trade . The so called 'Big Six' may have their faults but are reliable to provide the customer with the service expected.