Gnergy under threat over unpaid Ofgem taxes: What next?
Gnergy has been ordered to pay almost £700,000 by Ofgem. The Hampshire-based supplier received a final order from the energy regulator to pay its green tax bill. Now many are wondering if the firm can survive or if it will become yet another casualty of a crowded market.
The company was given until 31st October to pay £673,876.62 with interest or face having its license revoked.
The October date was the third in a series of deadlines, the firm had already failed to meet two previous ones in August and September.
Ofgem announced on 29th October that it did not expect the supplier to fulfil the payment obligation.
What is the Gnergy payment for?
The payment is for the Renewables Obligation (RO) scheme which is administered by Ofgem. The RO is a sort of green tax intended to support the generation of renewable electricity in the UK.
Energy firms must either obtain a set minimum amount of energy from renewable sources or pay into a fund to make up the difference.
Suppliers had until 1st September to show they had met their minimum quota of renewable sources by presenting Renewables Obligation Certificates (ROCs) to Ofgem.
ROCs are given to officially recognized renewable energy producers for the renewable power they generate. The producers can then trade the ROCs with any suppliers who buy energy from them.
Any firms which did not expect to have accrued the minimum number of ROCS were obliged to have made the necessary payments to Ofgem by 31st August.
Who owes what?
There is quite a significant variation in the amount owed by the six firms:
|Delta Gas and Power||£91,937|
|Robin Hood Energy||£9,435,925|
A spokesperson from Gnergy said it had appealed to Ofgem to work out a payment plan, but the regulator declined the appeal:
“When it comes to ROC, the fact is that Ofgem expects us to pay on behalf of our customers who have not paid us. While we are obligated to offer payment plans to our customers, the same does not apply when it comes to Ofgem.”
While Gnergy appears to be teetering on the brink of disaster, failure to pay into the RO scheme has already brought down Toto Energy.
The Brighton-based supplier ceased trading on 23rd October because it was unable to meet the end-of-the-month deadline for the payment of the £4.5m bill. Ofgem appointed EDF Energy to take on responsibility for supplying Toto’s customers.
Which firms have paid up?
Robin Hood Energy and Delta Gas and Power were able to make their payments to the regulator in time to avoid sanctions.
However, Robin Hood Energy CEO Gail Scholes did not hand the money over quietly.
In a public statement she accused the regulator of doing a u-turn on a payment-in-instalments plan agreed in September, as they had with other suppliers last year.
“Despite welcoming our proactive approach and advising that as long as our ROCs payment was made by March 2020, which we had always planned to do, then this matter would be resolved,” she said.
“However, Ofgem has now written to us today (1st October 2019) demanding payment in full by 31st October.”
Ms Scholes said it was “frustrating” Ofgem’s decision had led to “questions being asked about our fundamental ability to operate as a business”.
Mary Starks, Ofgem executive director of consumers and markets warned of the serious consequences facing any firm failing to meet its obligations.
"If any supplier undermines the scheme by failing to comply by the late payment deadline, we will take strong enforcement action that could lead to them having their licence revoked.”
What about Nabuh and Breeze?
Meanwhile, Nabuh Energy and Breeze Energy have been issued provisional orders for payment by Ofgem.
Both had previously agreed with Ofgem that they would make the necessary payments by 31st October, but both have now admitted that they will be unable to settle up by that date.
Nabuh owes £872,200.62 plus interest, while Breeze must pay £486,232.06 pus interest.
Ofgem has said that the two firms must pay up immediately or it will take further steps up to and including revoking the suppliers’ licences.
Due to the failures of firms to make their payments, under a process called “mutualization”, the remainder of the UK’s suppliers may be forced to make up the shortfall even if they have already fulfilled their own obligations. Renewable energy producers are also likely to earn less money back for the power they’ve supplied.
Ofgem will release a round up of suppliers’ RO payments, late payments and missed payments shortly.