Suppliers failing to meet Renewables Obligation should be ‘starved of cash’

Suppliers should be “starved of cash” and banned from taking on new customers if they fail to meet their Renewables Obligation (RO) by the deadlines, an industry chief has suggested.

Earlier this week Ofgem confirmed that missed RO payments will be mutualised for the third consecutive year after a number of suppliers failed to pay in full.

The regulator had previously said 33 suppliers had not met their total obligations by the deadlines of 31 August for buy-out payments and 1 September for RO certificates. As a result there was a combined shortfall of more than £105 million in buy-out funds.

Following the latest announcement, Doug Stewart, chief executive of challenger retailer Green Energy UK, said much stronger action against non-compliance was needed. He blasted unprofitable companies offering cheap tariffs and lamented the fact the industry has once again been forced to pick up the bill.

“We need to stop allowing suppliers to lose other people’s money. They take money up front and confuse cash in the bank with profitability. As long as they have got cash in the bank they think they are making money. They’re not. They’re just kidding themselves.

“All they are doing is taking money up front off customers to pay for last year’s losses so they’ve got to stop allowing people to take up front payment – stop people using consumer capital as risk capital – and we have got to hold them to account”, he told Utility Week.

To tackle the issue, Stewart believes suppliers should not be allowed to take on more customers until they have paid what they owe. Prudent businesses, he believes, should accrue for the costs in both their tariffs and cash management.

The regulator does have the power to revoke the licence of any supplier that fails to meet the late payment deadline but this can take several weeks or even months.

“Ofgem should stop people taking money up front and when people don’t meet their bills stop them signing up new customers, suspend their licences, starve them of the cash they are going to lose while they try and stay afloat. The minute you sign up customers and get another £300, that keeps the wolf from the door, but it doesn’t help your business, it doesn’t make you any more profitable. It’s like shuffling the deck chairs on the Titanic”, he added.

Stewart further expressed his frustration at the length of time it takes for the mutualisation figure to be released and the fact that the names of non-compliant suppliers will not be published until December, more than a month after the late payment deadline of 31 October.

Mutualisation has become an increasingly contentious issue within the energy sector over the last three years, with more than £100 million having been mutualised so far.

Stewart’s concerns are echoed by Kit Dixon, regulatory affairs officer at fellow challenger brand Good Energy.

Dixon told Utility Week: “This is not a state of affairs which the energy industry should be repeatedly tolerating. We can’t allow the market to be hijacked by rogue suppliers looking to make a fast buck.

“It’s unfair to their consumers, who are being duped by false promises, and ours, who are left to pick up the cheque. We know that BEIS and Ofgem are planning to do more to address the problem and we would urge them to stop the rot as quickly as possible.”

In response, Ofgem said its information regarding mutualisation is not published until December because the data must go through several stages of internal governance checks before being independently and externally verified.

This, the regulator added, ensures it gives accurate information to stakeholders on compliance and how much each non-compliant supplier owes.

A decision on the new financial checks and tests for existing suppliers, including mutualisation, is due to be published before the end of this year.

Final orders

Recently Ofgem issued final orders against three challenger brands after they failed to make a total of £15 million in RO and Feed-in Tariff (FIT) payments.

The three in question were Robin Hood Energy, Nabuh and Symbio.

Today (13 November) the regulator announced that it was revoking the final order against Symbio after the supplier paid its obligation in full. The outstanding amounts remaining are: