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Customers landed with £30-a-month price hike when energy companies go bust

Written by on 30th September 2021

People moved to a new energy company because their supplier has gone bust stand to pay £6.70 more every week (nearly £30-a-month) for their energy, according to new research by Citizens Advice.

The charity analysed deals offered by the five largest failed suppliers to date, against the price increase customers typically experience when moved onto a default tariff at another supplier. With a squeeze on family finances underway, it is calling for urgent targeted support to avert a ‘cost of living crisis’ this winter.

The energy price cap is due to rise by £139 for people on default tariffs and £153 for people on prepayment meters tomorrow (1 October). As of Tuesday 28 September, more than 1.5 million people had been affected by energy supplier failures.

People on low incomes will be hit the hardest

Type of customer Squeeze on budget
Customers whose supplier goes bust and who are moved onto a default tariff with another supplier.
*£14.70 a week including higher living costs due to inflation
£6.70 a week worse off*

Customers moved to a new supplier who lose their Warm Home Discount, and face higher living costs due to inflation £17.40 a week worse off.  Customers moved to a new supplier who lose their Warm Home Discount, face higher living costs due to inflation, and see their Universal Credit cut £37.40 a week worse off

Citizens Advice is particularly concerned about people on the lowest incomes who could be hit by a triple whammy of financial hardship: rising energy costs, a planned cut of £20-a-week to their Universal Credit, and a higher cost of living due to inflation.

As the energy watchdog, Citizens Advice has raised concerns that the 1.1 million low income households in receipt of the Warm Home Discount would lose out. Its analysis shows that including the increased cost of living with inflation, they stand to lose £17.40 a week if the Warm Home Discount is not carried over when they’re moved to a new supplier.

People in this situation, who are also on Universal Credit, stand to lose £37.40 a week if the planned cut is implemented.

Frontline advisers at the charity say they fear many will be left facing ‘desperate choices’ due to fuel poverty this winter, including turning off their fridges and freezers, relying on hot water bottles for warmth and requesting support to buy extra duvets and blankets.

‘I’m terrified thinking about how I’m going to cope this winter’

Shaun is a single dad from Northumberland and has a son in primary school. He previously worked as a fisher but has had to take time off due to health issues. While his supplier has not gone under, he’s worried about how he’ll pay his bills this winter.

“I’m terrified thinking about how I’m going to cope this winter. If my Universal Credit is cut and bills go up, I just won’t have the extra to pay for any increase on my gas and electric.

“It’s starting to get colder and I’ll need the heating on for my son. I’ll just have to wrap up when he’s at school, so I can put it on when he gets home. Even then I’ll only be able to have it on for a couple of hours, not the whole evening.”

Higher bills are weighing on people’s minds

Citizens Advice polling found that more than a third (35%) of people are worried they’ll struggle to pay their energy bills this winter. This rises to almost half (45%) of people earning less than £21,000 per year, and households with children (44%).

As the cost of living crisis begins to bite, Citizens Advice is calling on the government to reverse its planned cut to Universal Credit and introduce emergency winter grants for those on the lowest incomes. These could be delivered through local authorities in the same way covid winter grants were last year.

Dame Clare Moriarty, Chief Executive of Citizens Advice, said:

“Overnight price hikes will be a shock for more than a million households whose energy companies have gone bust.

“We’re particularly worried about those who’ll face desperate choices this winter because of the cumulative impact of soaring bills, the planned cut to Universal Credit and inflation.

“The government and Ofgem must guarantee that the Warm Home Discount will be continued for people moving to new energy suppliers. People on the lowest incomes should be able to access emergency winter grants so they can stay warm in the cold months ahead.”