Lights out: Economy Energy shuts down weeks after denying bankruptcy reports

Ofgem must do more to ensure that energy suppliers are properly regulated, experts warned today as it was scrambling to deal with the fallout from another bankruptcy.

Over 230,000 customers were left in limbo as Economy Energy closed down, only weeks after denying it was on the brink of collapse.

Read more: Economy Energy banned from taking on new customers amid Ofgem prob

The firm, which was banned from signing up new customers just days ago, became the ninth energy company to go bust in the last 12 months.

“We have seen a number of supplier failures over the last year and our safety net procedures are working as they should to protect customers,” said Philippa Pickford, Ofgem’s director for future retail markets.

However Jane Lucy, who founded switching service Labrador, said Ofgem was not doing its due diligence on suppliers.

“Energy suppliers should have to validate the financial health of their business, given that there are wider issues surrounding the obtaining of licences in general. It is only through proper regulation that the industry can prevent further closures,” she said.

In December, the company denied reports that it was planning to shut down after questions from City PM

“In response to the recent speculation and circulating misinformation, we would like to provide assurance that we at Economy Energy have no intention of closing our doors,” it said.

Experts warn this could be the start of another bumper year of bankruptcies as companies struggle to make ends meet, forcing other suppliers to shoulder the burden.

“In order to gain customers, many small suppliers have offered bargain deals which are now proving to be unsustainable. What’s worse for suppliers, the cost of the safety net organised by Ofgem goes up with every bankruptcy. This cost is split across suppliers, adding to their costs and creating a vicious circle,” said Mark Todd, the co-founder of Energy Helpline.

“What’s worse for suppliers, the cost of the safety net organised by Ofgem goes up with every bankruptcy. This cost is split across suppliers, adding to their costs and creating a vicious circle.”

Ian Barker, a partner at Bfy Consulting – which has advised firms acquiring failed energy suppliers – said Ofgem will be looking for bids from other companies to take over Economy’s customers.

However, if no companies volunteer, the regulator can force one of them to take the accounts.

Today the Energy Ombudsman said it was looking into more than 1,300 complaints about the supplier.

Read more: Ofgem opens investigation into £59m shortfall in green energy fund

“This follows a sharp increase in December, when we received 881 complaints about the company – more than double the number we received in November and one of the highest monthly complaint totals we have seen outside the Big Six,” said Matthew Vickers, chief executive of the Energy Ombudsman.

Economy Energy declined to comment.