Blog Post

Ofgem issues GnERGY Ltd with notice of failure to comply with a final order

Matt Olney • January 9, 2020

Energy regulator Ofgem has issued GnERGY with a Notice of Failure after it failed to comply with a final order requiring it to pay £673,876.62 plus interest to the Renewables Obligation buy-out fund.

What happened?

GnERGY Ltd originally got into hot water after it failed to meet its Renewables Obligationsfor the obligation period of 1 April 2018 to 31 March 2019, and failed to produce Renewables Obligation Certificates (ROCs) to Ofgem by the deadline of 1 September 2019 or to alternatively make payments to cover its RO by the end of August.

GnERGY Ltd subsequently failed to provide assurances and that it could and would be able to make the necessary payment, including applicable interest, by the late payment deadline of 31 October 2019. As a result, Ofgem then issued a notice of proposal to issue a Final Order.

The notice further explained that if the failure to pay up was not rectified to the satisfaction of the Authority within three months of GnERGY receiving the notice, the Authority could at any time revoke GnERGY’s Electricity Supply Licence subject to giving no less than 30 days’ notice.

With no payments paid and no assurances given, the authority has said that it is now taking further enforcement action and is starting the process that is likely to result in the revocation of GnERGY’s supplier’s licence.

Failing to make payments is often a signal of suppliers being in financial trouble.

Mutualisation activated

The shortfall of payments will be made up through mutualisation. This means that other suppliers, those who have already made their payments, will be required to pay extra to make up the missing money.

As a result, householders could see increments added to their bills to pay back these extra funds to their suppliers.

What happens if a supplier goes bust?

Once an energy supplier’s licence has been revoked that supplier can no longer provide energy to consumers, effectively they go bust. If a failed company is unable to do a trade sale of its customers, Ofgem will step in and implement its SoLR powers to make sure that the company’s customers will have a smooth transition to a new supplier.

The authority will also open bidding by other energy suppliers who wish to take on the failed supplier’s customers. To be eligible the bidder must be able to prove that they can support new customers without impacting its current ones.

What is the Renewables Obligation Schemes?

To encourage energy suppliers to get their electricity from renewable sources the government introduced the Renewables Obligation schemes.

Suppliers must demonstrate that they source a proportion of their electricity from renewables.

They can either source this directly or pay generators of renewable energy for certificates that designate that they are responsible for an amount of green power supply.

Alternatively, they can make up any shortfall by paying into a buy-out fund administered by Ofgem.

Since its introduction, several small energy suppliers have gone bust as a result of being unable to meet their obligations to the scheme. Last year Robin Hood Energy, Toto Energy, Gnergy, and Delta Gas and Power all failed to meet the payment deadline. Toto Energy went bust shortly afterwards.

“This doesn’t look promising for Gnergy or their customers, and the company could become the second to have their licence revoked for not paying their renewable obligations. They were one of four suppliers who were given a final warning last autumn to pay their outstanding renewable energy subsidies. One of those suppliers, Toto, has since gone bust, while another, Robin Hood Energy, has had to borrow money from its owner, Nottingham Council,” said uSwitch.com energy expert Rik Smith.

2020 may be just over a week old, but it looks like it could be another tough year for energy suppliers.