Customers of bankrupt energy companies who were forced to switch to new providers are now faced with higher prices, it turns out.
Several companies have gone bankrupt amid rising gas prices, with fears that more could follow in the winter.
The companies left some 1.5 million customers without energy, forcing other companies to step in and take them over.
However, those companies, including British Gas, E.on and EDF Energy, are charging customers significantly more money over a year.
Under the ‘supplier of last resort’ system, outstanding balances from existing and former customers are paid and homeowners are protected by the energy price cap.
But customers who had cheaper, fixed-price deals signed before the gas price hike were warned that bills could rise by hundreds of pounds.
And with the annual price cap for an average household set to rise to £1,277 from October, British Gas and EDF Energy are among the suppliers charging customers the highest rate.
For example, 580,000 Avro Energy customers will see their bills rise from just £870 to £1,267 with new supplier Octopus Energy.
And 360,000 customers on Green Network energy will see annual rates rise from £976 to £1,277 with EDF Energy.
The companies left about 1.5 million customers without energy, forcing other companies to step in and take them over
Avro was the largest of several companies to go bankrupt this month after the wholesale price of gas skyrocketed.
Customers can switch suppliers or rates after the switch without an exit fee, but may struggle to find similar deals.
The government is reluctant to offer energy companies a bailout, despite concerns that few are strong enough to take on transferred customers.
It comes after a move to less reliable wind and solar power has left Britain at the mercy of international gas markets and rekindled the debate over energy security.
Last weekend it emerged that ministers are considering a ‘change of focus’ to nuclear as a more reliable green energy source.
The government has been criticized for failing to replace aging reactors sooner, with the UK losing more than a fifth of nuclear power production when two plants retire next year.
The news of price increases comes after new research shows that families must pay billions to save the customers of collapsed energy companies.
Investec found that the current bill for the seven companies that have already gone bankrupt stands at £820 million, but this could skyrocket if more companies follow suit this winter, as expected.
Power companies that take over customers from failed rivals can recover costs, including those of buying more expensive gas and electricity from the wholesale markets to cover the new households.
This is paid from an industry levy that goes on the accounts of all customers. As it stands, every household is paying £30 each to bail out customers from businesses that have already collapsed.
Analyst Martin Young calculated that the difference between what suppliers can charge new customers under the UK’s energy cap and the cost of buying energy at today’s high prices was “at least £550” per customer, the FT reported.
When this is multiplied by the 1.5 million orphaned customers, it comes to £826 million.
But last week Keith Anderson, the CEO of Scottish Power, warned that the chaos could leave customers paying a bill worth ‘billions of pounds’.
Wholesale gas prices are up 250% since the beginning of the year and 70% since August, meaning these unprotected companies buy energy for less than they sell it to customers.
Nine companies have now stopped trading this year, and the head of regulator Ofgem warned that more are likely to follow, leaving ‘well above’ hundreds of thousands of customers in limbo.
Jonathan Brearley declined to give an estimate when he stood before MPs from the Business, Energy and Industrial Strategy Select Committee, but said: “We do expect a large number of customers to be affected, we have already seen hundreds of thousands of affected customers, that could well be the case.” sometimes go above and beyond.’ He warned that the crisis may not be temporary.
However, company secretary Kwasi Kwarteng rejected the claim that only 10 power companies could be left by the end of the year, as he reiterated his vow that “the lights won’t go out.”
He told the MPs: ‘I don’t understand how they came up with that figure. I’d be surprised if we got to that figure… it’s not something I’m looking forward to.”
But ministers have admitted some families will be faced with a choice between ‘eating and heating’ this winter and rejected pleas from Britain’s floundering energy suppliers to abolish the energy cap that protects millions of the poorest households.