Thousands of energy customers facing bill shocks

Hundreds of thousands of people are facing uncertainty over their household energy bills after the collapse of suppliers in recent days.

Customers are awaiting announcements by the regulator, Ofgem, about which surviving company will take on their supply and which tariff they must pay.

Many will face the prospect of an annual bill hundreds of pounds higher than they had expected.

Avro Energy and Green ceased trading on Wednesday, with others likely to fold.

Those two firms were the latest to collapse, following a string of other failures of small providers in recent weeks.

Avro and Green had 830,000 customers between them who are now waiting to be automatically switched to a new, potentially more expensive, provider.

They include Daniel Cooke, from Taunton, who said: "I am deeply concerned as a young family of five how we are going to cope with what could be a huge rise in cost when we are allocated a new energy supplier.

"Where we have boxed clever for the last few years with Avro energy we are now going to be punished over the next few months running into winter.

"I know there are millions of people trying to balance the books. If the bills go up we'll have to find extra money."

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Under Ofgem rules, any customer of a collapsed firm is moved automatically to a new supplier which it appoints. The new provider is required to honour any credit a customer has built up in their energy account. It pays for that through an industry-wide levy, which itself is likely to add to every customer's bill.

The new provider must also pay any credit that is owed to a customer who recently switched away, but has not yet been refunded their overpayments.

That process can take a few weeks, and customers are advised to wait until they are contacted by their new supplier before doing anything.

While continuation of their supply is guaranteed, their tariff - in other words, the price they pay - is not. Customers of collapsed firms will be placed on a new dedicated tariff by their new supplier for those in the same position. It is likely to be priced in line with Ofgem's price cap.

An Avro customer in a household using a typical amount of gas and electricity, who got a fixed rate deal in August, would have been paying £1,087 a year, according to price comparison site Uswitch. In March, they could have got a deal costing £920 a year.

Now Avro has collapsed, they are likely to be paying £1,277 a year at their new supplier from 1 October, in line with Ofgem's price cap.

The price cap does not mean it is impossible to pay more than £1,277 a year. It is a cap on the price, not the final bill. So, a household with heavy energy use will have a higher annual bill.

Once switched to the new supplier, they are free to move to a different supplier. However, it is basically impossible to find a better deal at the moment as suppliers grapple with the rapidly increasing cost of wholesale gas.

The same problem faces customers of surviving energy firms who are coming to the end of their fixed rate term. When that expires, they are automatically shifted on the supplier's more expensive standard rate, which will be at the price cap level. They, too, will be unable to find a better deal at present.

There could also be complications for pre-payment meter customers who are automatically switched.

Peter Smith, from National Energy Action, which lobbies for action for warm and dry homes, said: "We are very concerned about legacy pre-payment customers, people in debt and those eligible for energy discounts who may miss out when they transfer over to their new suppliers.

"The government and Ofgem's key urgent priority must be to ensure vulnerable households are protected when their supplier fails."

• Customers will still continue to receive gas or electricity even if the energy supplier goes bust. Ofgem will move your account to a new supplier, but it may take a few weeks. Your new supplier should then contact you to explain what is happening with your account
• While you wait to hear from your new supplier: check your current balance and - if possible - download any bills; take a photo of your meter reading
• If you pay by direct debit, there is no need to cancel it straight away, Citizens Advice says. Wait until your new account is set up before you cancel it
• If you are in credit, your money is protected and you'll be paid back. If you were in debt to the old supplier, you'll still have to pay the money back to your new supplier instead

Read more about the next best steps to take here.