THE FAILURE of energy suppliers Spark and Extra within two days of each other left almost 400,000 households wondering what would happen to their gas and electricity supplies, but they should not rush to find new providers.

Spark is the seventh domestic power firm to go under this year. Future, Gen4U, Iresa, Usio and ElectraPhase all suffered similar fates. But, with around 290,000 domestic customers to Extra’s 108,000, Selkirk-based Spark is the largest so far.

Many customers had moved to the relative minnows from the Big Six of ScottishPower, SSE, British Gas, EDF, E.ON and npower because of their competitive pricing. Peter Earl, head of energy at, believes this could partly explain the smaller firms’ downfall.

He said: “It may be that some of the smaller challenger energy providers are taking on too many customers on loss-leading fixed tariffs and then are not able to cope with changes in the wholesale price of gas and electricity and the subsequent loss of customers once they are out of their fixed-tariff period.”

TV money expert Martin Lewis agrees and believes more failures could follow this winter. He said: “Even the market’s very cheapest one-year fixed deal costs 13 per cent more today than just three months ago.

“Combine that with the fact we’ve over-expanded our energy market, without proper checks on new firms’ financial viability and customer service capacity, and things look rocky.”

But anyone whose energy provider ceases trading should not race to find a replacement. Gillian Guy, chief executive of Citizens Advice, explained: “Customers have no need to worry. There will be no interruptions to their gas and electricity. A new supplier will be appointed by the regulator Ofgem who will be in touch soon.”

Ofgem invites companies to bid for the accounts of failed providers and assigns them to the one offering the best terms. As a result, Future’s customers went to Green Star, Gen4U and Iresa’s business was taken over by Octopus and First Utility took on Usio’s clients. ElectraPhase, which is in administration but still trading, has few remaining accounts and is expected to find new suppliers for them itself.

The regulator announced last week that Spark customers will go to Ovo Energy, which will continue to use the Spark brand, while those of Extra will be switched to ScottishPower. Spark and Extra customers should hear from their new supplier within days. In the meantime, Citizens Advice recommends taking a meter reading.

No action needs to be taken by customers who were already in the process of switching providers, as this too will be completed via the new provider. Credit balances can be put towards future usage or refunded, and anyone in debt will be contacted about repayment.

If you pay by direct debit, do not cancel it. If you already have, Ovo or ScottishPower will be in touch about setting up a replacement. Prepay customers should carry on as normal.

Ovo has said it will honour existing variable and fixed prices, so Spark account holders will be no worse off. ScottishPower will put new customers on a variable tariff, which is likely to be more expensive, but they can leave penalty-free, even if their original deal included an exit fee.

However, Ofgem recommends waiting until after the account move, as switching during the transition could mean the process is delayed or does not work.

Philippa Pickford, the regulator’s interim director for future retail markets, said: “Once the transfer has been completed, you can shop around for a better deal if you wish to.”

But former Extra customers are not the only ones who should be keeping an eye on their bills.

According to price comparison site Compare the Market, 130 fixed gas and electricity tariffs end between October and December this year, and customers who fail to act will be moved to new tariffs. It predicts an average annual increase of £202 for the 93,500 households affected.

Peter Earl, the site’s head of energy, said: “Every month, thousands of people are moved unwittingly onto more expensive default tariffs, which can come at a huge annual cost. The business model of most energy companies fundamentally punishes those that stay loyal to their provider. The easiest way to beat the system is to switch provider and save hundreds of pounds in the process.”

Meanwhile, in a bid to prevent further supplier failures, Ofgem plans to look next year at implementing stricter financial and service standards. It will also tighten licensing rules for new providers. From late spring, before firms begin trading, they will have to prove they have financial reserves to last at least 12 months and that they can meet customer service standards.