Toto Energy closure driven by failure to meet Ofgem standards
Brighton-based energy supplier Toto Energy has ceased trading, according to a terse statement on its homepage. Ofgem, the retail energy regulator, is in the process of finding an alternative supplier to take over the 134,000 customers that relied on Toto for their gas and electricity.
Why did Toto Energy close its doors?
Toto Energy did not meet a 1 September deadline set by Ofgem for Renewable Obligation payments to be made. All energy companies operating in the UK have been responsible for making timely payments in order to support commercial renewable projects generating green electricity in the UK.
The independent energy company had accrued over £4.5 million in debt and couldn’t come up with the money required to meet the overdue renewable energy payments. It’s worth noting that Ofgem does give energy companies grace periods to make their payments if they are having difficulties. However, the extra time was not enough to stop the inevitable for Toto.
This isn’t Toto’s first brush with the energy regulator, either. In July 2018, Ofgem contacted Toto Energy due to a high number of customer complaints making their way to the Energy Ombudsman. At the time, Ofgem pressed Toto Energy on the need to bring down call wait times as a first step to provide better support moving forward.
Almost 800 Toto customers contacted the Ombudsman in 2018 and numbers for 2019 were also looking significant before the sudden shutdown of the company. Ombudsman chief Matthew Vickers fears that most ongoing complaints will remain unresolved.
[A]s of today, we can't look at any new complaints about Toto.
Another particularly concerning development is that Toto Energy had just taken on thousands of customers from Solarplicity, another failing supplier that collapsed just three months ago, in August 2019
It’s not only customers who are feeling tossed around like a volleyball on Brighton beach: Toto Energy opened a 100 person call centre in Newcastle earlier this year. Those jobs are now at stake following this latest development.
What should Toto Energy customers do?
Ofgem advises that customers remain with Toto while a new supplier is found to take them on. This “sit tight and wait” recommendation has been given in order to prevent issues with credit balances not being honoured.
With Toto primarily serving prepayment customers who top up their credit balance through their meters, it is worth knowing what else is on offer. The UK has almost 100 energy companies, making it possible for customers to vote with their wallets.
[The closure] didn't come as a great surprise, having helped a number of their customers switch, it was quite apparent they were delivering a very substandard service. Leaving many people in the dark about meter upgrades, tariff information, credit on meters and even confusing credit with debt.
Coming from a company like Toto, which struggled to provide basic customer service, there is no harm in former customers seeing what other companies are out there. There are many energy suppliers who can provide the same gas and electricity for less and with better customer service.
How is Ofgem responding?
Ofgem’s actions regarding Toto Energy are somewhat perplexing. Considering that Toto’s customer base was primarily made up of prepayment energy households, it is hard to understand why Ofgem would entrust more customers to a company they had already issued a customer service warning to.
Prepayment customers are more likely to be affected by fuel poverty and pay higher than average energy prices. Why would Ofgem, a government regulator, put the people they are supposed to protect at risk? Let’s recap how the struggling company and the regulatory body have been interacting.
Toto Energy and Ofgem timeline
- 24th Jan 2018 - Toto Energy is granted a gas shipper license, permitting them to sell natural gas to British households
- 17th Jul 2018 - Ofgem issues a compliance note to Toto Energy regarding poor customer service levels
- 30th Nov 2018 - Toto Energy is named in a list of suppliers who were late with their Renewable Obligation payments, owing £3,511,072.98 according to Ofgem
- 13th Aug 2019 - Ofgem designates Toto Energy as the recipient of Solarplicity’s remaining customers following their collapse
- 1st Oct 2019 - Ofgem gives Toto a final warning over their overdue Renewable Obligation payments
- 23rd Oct 2019 - Ofgem announces Toto Energy ceases trading
How an energy company that started trading under a year ago now finds itself having to close its doors; negatively impacting thousands of customers and over a hundred employees is something that Ofgem must reckon with one way or another.
Are other energy companies at risk?
As of 1st September 2019, three additional companies had missed their renewable obligation payment deadline. Ofgem has compelled Gnergy, Robin Hood Energy and Delta Gas to settle their outstanding renewable payment debts by the end of October 2019.
- Robin Hood Energy owes £9,435,925
- Gnergy owes £637,876
- Delta Gas and Power owes £91,937
If they blow past the 31st October 2019 deadline without paying their overdue amounts, in full, Ofgem will double down on their determination that “the named suppliers failed to provide satisfactory assurances and [...] are likely to breach their obligations.” Therefore the most likely outcome is Ofgem initiating the licence revocation procedure, effectively ending their ability to operate.
The entire energy industry is closely watching these companies because further breaches will trigger a mutualisation clause, which forces the remainder of UK energy suppliers to shoulder the shortfall and make up the difference.
Selectra UK Managing Director, Elliot Waterhouse, was not surprised by the news of Toto Energy folding:
I was concerned about Toto Energy when they missed the payment deadline a few weeks ago. That was a clear sign of trouble and they’re not the only ones struggling.