Retailers to pick up £120m tab for RO shortfall

A total of 27 failed energy retailers left the market owing almost £120 million in Renewables Obligation (RO) payments, which will be mutualised across the sector.

Ofgem has published a list detailing the names of suppliers that failed to meet their obligation in full by the 31 October late payment deadline.

Among these include high profile market failure, Avro Energy, to date the largest retailer to enter the Supplier of Last Resort process. It owed more than £27 million – more than any other supplier.

People’s Energy owed almost £17 million, Pure Planet £12.6 million and Together Energy £12.4 million.

Only one supplier, Delta Gas and Power, is continuing to operate and owed almost £531,000.

Ofgem confirmed however that it received full payments from Delta on 25 November.

The total shortfall means that this is the fifth consecutive year in which mutualisation has been triggered and although it is a sizeable amount, it is still a long way from the record £218 million mutualised last year.

The news follows the publication last month of a statutory consultation on measures to improve financial resilience in the market. Ofgem confirmed that it is pressing ahead with plans to ring-fence RO funds and introduce a minimum capital requirement for all suppliers.

Furthermore, a High Court judge recently ordered failed energy retailers to hand over unpaid RO payments to Ofgem in what the regulator labelled a “significant outcome”.

The ruling provides clarity as to what monies Ofgem can claim once a supplier leaves the market, with one law firm saying Ofgem’s rules on the issue previously “have remained untested and open to interpretation”.