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Ofgem has confirmed that renewables obligation (RO) payments will be mutualised after suppliers missed the late payment deadline.
Last week Utility Week revealed that failed energy suppliers left behind an unpaid RO bill of £72 million for 2018/19.
The figure, from BFY Consulting, is well above the threshold for activating the mutualisation process, which last year was triggered for the first time after suppliers failed to make more than £58 million late buyout payments by the annual deadline on 31 October.
The energy regulator has today (7 November) confirmed that it is completing its calculations and internal checks on late payments received and funds to be redistributed.
“The shortfall amount will therefore be mutualised in respect of both RO (England and Wales) and RO (Scotland)”, Ofgem said in a statement.
Ofgem is yet to publish the full amount owed but this is expected to be published on its website at the beginning of next month.
According to BFY there will be a £5 million shortfall for 2019/20 due to further failures since the beginning of the year in April.
Ofgem has issued provisional orders against Nabuh Energy and Breeze Energy over the £872,000 and £486,000 in late payments which they owe respectively, while Gnergy was slapped with a final order over its bill of £674,000.
Nabuh has insisted that its bill will be paid in full tomorrow (8 November).
Mutualisation has been a point of increasing concern and frustration among compliant energy suppliers who have to pick up the bill.
Recently Ofgem released its latest consultation on the supplier licensing review regarding ongoing requirements and exit arrangements and the mutualisation process was one issue it examined.
Under the proposals, a proportion of credit balances and government scheme costs will be protected (by a minimum of 50 per cent in the case of credit balances).
Furthermore, chief executive Dermot Nolan has proposed to introduce monthly RO payments.
Speaking at Utility Week Congress in early October, Nolan said: “There are elements of the SoLR process, the way ROs are issued and collected, that have given some firms the licence to be, shall we say, a little too venture-some in their activities.
“We are closing such gaps and I am conscious that some of the failures that have not been optimal and have been facilitated by firms that took too risky a strategy with their consumers’ funds.”
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