Industry regulator Ofgem is consulting on issuing final orders after it came to light that seven suppliers still owe £34 million in costs relating to the Renewables Obligation (RO) and Feed-in-Tariff (FiT) schemes.
The bulk of the outstanding costs (£33m+) relate to the RO scheme, which requires suppliers to demonstrate that they have sourced sufficient electricity from renewable sources through the presentation of Renewable Obligation Certificates (ROCs). Those that are not able to demonstrate they comply with the scheme need to pay into a buy-out scheme by 31st August.
It has been revealed that 24 suppliers missed the initial deadline. However, 17 subsequently fulfilled their obligations or offered satisfactory assurances. The seven whose payments remain outstanding are: Co-Operative Energy; Flow Energy; MA Energy; Nabuh Energy; Robin Hood Energy; Symbio Energy; and Tonik Energy.
The shortfall in payments most likely points to financial struggles within the industry, with many suppliers having faced heavy losses as a result of Covid-related demand destruction and rising bad debt. Indeed, last month saw Robin Hood Energy bought out by British Gas and subsequent to Ofgem’s announcement, Tonik Energy collapsed whilst still owing £8.65 million in RO payments.
If Ofgem proceeds with giving final orders, the remaining suppliers will have until 31st October 2020 to pay into the buy-out fund. Failure to meet this deadline could see the regulator begin proceedings to revoke the offending suppliers’ supply licenses.
Cathryn Scott, Director of Enforcement and Emerging Issues at Ofgem, said: “Supplier failure to comply with these schemes and make the payments due undermines the integrity of the schemes and is unacceptable.”
Consumers should be aware that the news does likely point to further consolidation within the market. However the ‘supplier of last resort’ process ensures that there is no threat to security of supply. It does also increase the likelihood of future mutualisation, whereby any shortfall in scheme cost recovery (normally as a result of suppliers going out of business) has to be spread across the rest of the industry, and may be passed-through to the end user.
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