Switching energy suppliers has become an important item on the to-do list for anybody looking to minimise their outgoings.
Often, this means moving to one of the smaller energy suppliers – potentially somebody you hadn’t even heard of before.
It’s a great way to save money, but it also means that you’re putting your energy supplies in the hands of a team that don’t necessarily have the experience of one of the so-called ‘big six’. With the news of Our Power going bust earlier this month, we’re taking a look at how to stay safe when using a smaller energy supplier.
What’s the story?
‘Our Power’ was a small energy supplier based in Edinburgh, with the relatively small number 38,000 customers and 70 members of staff. It’s certainly bad news for all of the individuals affected, but it’s also the latest in a worrying trend. Two suppliers have already gone bust this year, and in 2018 a total of eight energy firms went out of business citing reasons such as unexpected demand from unusually cold weather and unprecedented switching volumes.
If you’ve recently switched your own energy to a smaller supplier, then this might be ringing alarm bells. It isn’t necessarily as scary as it sounds, though, not least because customers aren’t actually at risk of having their supply cut off. Instead, regulators Ofgem will step in and appoint a different company to manage the supply.
Whilst this can cause a bit of undue hassle, it also means that it’s safe to use a small energy supplier without worrying about the lights going out. And, if you build up credit on your account by paying a surplus, you should be able to move this over to your new supplier too. That means the risk is actually somewhat limited – both in terms of financial loss and potential disruption.
Should I still switch?
Ultimately, it’s down to what you value most: many of the smaller firms offer better customer service as well as cheaper rates, but they also come with the increased risk of potential closure. We think that, given the protections Ofgem have put in place, there’s no reason not to switch if you see a deal that takes your fancy. And there really are some good deals out there: some people can knock hundreds of pounds off their annual bill by moving to a challenger supplier.
It also seems likely that there will be even more protections in the future, to help you feel safe with a lesser known company. This includes plans to make new suppliers prove they have funds to support their operations for at least 12 months before they receive a licence.
You can take responsibility for protecting yourself, too. A little bit of due diligence is important before you make a switch: if a company has plenty of reviews from other satisfied customers then it’s a sign that things are going well. Of course, there’s never a guarantee – but that’s as true for the big firms as it is for the small ones. So while it’s always good to be careful, the recent news of Our Power’s demise shouldn’t give you too much cause for alarm.