Economy Energy likely to enter SoLR process after credit default

Economy Energy is understood to be planning to enter the supplier of last resort process shortly as indications it is in financial difficulty have sparked further concern the company is closer to going bust.

Utility Week received the tip-off after Elexon published a credit default notice for Economy Energy on the BM Reports website.

Parties trading on the balancing mechanism are required to post sufficient collateral to cover their outstanding payments in case they go under.

Elexon, as the administrator of the balancing and settlement code, will issue a warning if the amount owed exceeds a certain percentage of their credit cover.

Earlier this afternoon (7 January), Elexon published a level two credit default notice for Economy Energy indicating the supplier’s outstanding charges amount to more than 90 per cent of its credit cover.

An industry source has since told Utility Week that Economy Energy has informed Elexon of its intention to enter Ofgem’s supplier of last resort process.

Utility Week has contacted Economy Energy for comment but at the time of writing had received no reply.

The supplier was last week banned from taking on new customers for at least three months until it resolves issues regarding its customer service.

Ofgem warned that if the company fails to improve it could result in the revocation of its supplier licence.

Economy Energy has also been banned from increasing existing customers’ direct debits and asking customers for one-off payments during the period.

In November 2018, Ofgem placed Economy Energy under investigation for failing to meet the 31 October deadline for late payments under the Renewables Obligation scheme. Shortly afterwards the company was revealed to owe more than £17 million.

According to Companies House, Economy Energy has extended its accounting reference period from the end of March to the end of September last year. An industry source has previously suggested the sudden change could be a sign the company is facing financial difficulties.

A statement published on the supplier’s website towards the end of last year said: “In response to the recent speculation and circulating misinformation, we would like to provide assurance that we at Economy Energy have no intention of closing our doors.

“We will pay our outstanding ROCs obligation in full, business will continue as usual for our customers.

“We would like to thank customers for their loyalty and continued support.”

Ofgem currently has three open investigations into Economy Energy. One which is considering whether the company breached competition law, one into its compliance with the Renewables Obligation and one observing its sales and marketing obligations.

Eight energy suppliers ceased trading last year.