In our last update we asked the question - So what is going on with GB energy supply...(the company that is)?
We looked at the simply staggering 29% increase in the price of the GB Energy supply Standard tariff and wondered what was going on. One of our concerns was that GB energy supply were set to embark on price gouging; hitting customers coming off cheap fixed terms deals with a massive £261 price increase.
Well now we know, and it is not pretty.
According to the announcement on the company's website (emphasis is ours)....
"Due to swift and significant increases in energy prices over recent months and, as a small supplier our inability to forward buy energy to allow us to access the best possible wholesale prices, means that the position of the business has become untenable and as such we will now be entering a process overseen by Ofgem to move you to a new supplier."
In essence, the company was taking money from customers (in advance), selling them fixed price energy contracts and using the cash to punt on volatile wholesale markets in the hope that spot prices would stay below the price they sold to customers. What could possibly go wrong?
Well yes. We did.
Back in June 2016, our research note entitled Energy bills have bottomed. It's time to switch energy supplier! we noted the inconsistency between rising wholesale prices and falling domestic energy prices and surmised that this could only be happening because smaller suppliers were effectively using customers cash to gamble on wholesale markets.
"TheEnergyShop.com believes this could be happening because smaller suppliers are buying seasonally low priced energy and selling it forward on 1 year contracts hoping that spot prices stay low. This would work if spot prices remain weak. However, it could also end in disaster if seasonal prices rally into the winter or an unexpected event shifts wholesale prices higher. Customers who have paid their bills in advance would be left with their money at risk.
Ofgem's most recent Guidance on Supplier of Last Resort (SOLR) and energy company administration orders is as yet untested as far as customer deposits are concerned so the advice here is a little vague for that reason.
One thing is however reasonably certain. Ex GB energy supply customers will likely see their energy bills rocket irrespective of whoever takes over customer accounts from GB energy supply.
So the question is this. Should you wait to find out what supplier and tariff you will be put onto, or do you ditch now? Well that very much depends upon whether your account balance with GB energy supply is in credit or in debit.
GB energy supply, along with a handful of other smaller energy suppliers, engaged in the practise of billing customers in advance - even before they came on supply - a practise that we do not look upon favourably. We therefore expect that most, if not all, customers are facing a situation where they have surplus money on account.
Ofgem is currently advising all customers to stay put while it attempts to find a supplier to take over these customer accounts. If you have a large credit balance this probably makes sense. We don't see why ditching GB energy supply now should affect your claim for a credit refund but, if it complicates the process, it may be worth hanging on for a day or two.
If however, you are in the extremely fortunate situation where GB energy supply owes you money, then we can't see any reason not to (1) cancel your direct debit instruction and (2) switch as soon as possible. You will likely still need to repay any money you owe but far better that you take control of that process.
It is also worth noting that although Ofgem claims that customer deposits are protected, that does depend upon the new supplier who is taking over the accounts being prepared to honour those credit balances. If the new supplier chooses not to, then apparently the cost of those deposits can be re-couped from an "industry levy". What is very unclear at the current time is exactly how that is going to work.
One thing that all customers should do is to take a meter reading for the record to ensure that future billing is recorded at the correct rates.
Joe Malinowski, founder of award winning energy price comparison website TheEnergyShop.com commented.
"GB energy supply may be the first energy supplier to go bust, but it certainly will not be the last. The question is not if others follow, but rather how many?"
Joe Malinowski continued;
"When switching energy supplier to a smaller supplier do your research and make sure you understand the risks. Stay clear of suppliers that take payments in advance. Many of the larger suppliers now offer very competitive tariffs so, if switching to a new entrant, make sure any additional savings are worth the risk. Finally, check your credit balance regularly and ask for a refund if it gets too large."
Joe Malinowski concluded;
"If you are a GB energy supply customer who is fortunate enough to have a positive credit balance on their account we see no reason why you shouldn't cancel your direct debit and switch away now"