REGULATOR Ofgem has launched an investigation into Borders electricity and gas supplier Spark Energy over non-payment of money due under the UK Government’s renewables obligation arrangements.
The Herald revealed last week that Spark had missed a £14.4 million renewables obligation payment and was in merger negotiations, with its chief executive Chris Gauld claiming the UK Government’s price cap has caused “chaos” in the sector.
Read More: Borders energy supplier Spark misses £14.4m payment
Ofgem yesterday launched investigations into Spark and another supplier, Economy Energy, over non-payment of sums due under the renewables obligation arrangements.
The regulator said: “Ofgem has today launched investigations into Economy Energy and Spark Energy over their non-payment and will seek to ensure the outstanding amounts are paid.”
Asked about what investigations involved, a spokesman for Ofgem said: “We investigate the circumstances of why they have not paid and we have enforcement powers to require them to make those payments.”
Asked whether enforcement powers could include a fine, he replied: “They can.”
However, he declined to comment on whether or not a fine might apply in relation to the investigations announced yesterday.
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Announcing the investigations, Ofgem said yesterday: “Under the Government’s renewables obligation schemes, suppliers who do not source the required proportion of electricity from renewable sources have to pay into a buy-out fund administered by Ofgem.
“The amount of payments outstanding into the buy-out fund for 2017/2018 at 31 August was £102.9m.”
It added: “Suppliers had until 31 October to pay outstanding sums into the late payment fund to meet their obligations. Ofgem confirms today that, subject to review by an auditor, a shortfall of £58.6m remains. Suppliers who have not met their obligations in full are in breach of the renewables obligation orders.”
A Spark spokesman said: “We will continue to work closely and openly with Ofgem on this matter, as we have always done.”
Spark, which has around 297,000 energy customers and employs more than 400 of its 430-strong workforce at its Selkirk head office, said last week that it was in “ongoing” talks with Ofgem over the missed payment.
The company, which specialises in providing energy to the residential letting sector and is one of the largest private-sector employers in the Scottish Borders, said at that stage: “Due to its strong growth, Spark is eligible for annual renewables obligation certificates (ROC) payments, and despite having met all its payments in previous years, this year it missed its annual payment which was due by October 31 – in common with an unprecedented number of other suppliers. The payment has been deferred pending further discussions with Ofgem.”
Spark, which has an annual turnover of about £230m and describes itself as “profitable”, said last week that it was in merger talks with another medium-sized energy company, believed to be based in England.
Mr Gauld, who led a management buy-out of Spark in 2016, last week highlighted the aim of creating “a sustainable business of scale”. He flagged the impact of rises in wholesale energy costs, as well as the price cap.
He said: “There is little doubt that these are difficult times in the industry. You only have to open the newspapers to see coverage of how the price cap and wholesale costs are impacting suppliers, big and small, across the country.
“We’ve built up a strong, growing energy business over the past 11 years. However, the UK Government’s announcement in September that it was capping domestic energy bills at £1,137 a year based on a typical dual fuel customer has caused chaos in the industry.”
Ofgem said it had also given notice yesterday that it “requires two other non-compliant suppliers - URE Energy and Eversmart – to deliver all outstanding payments by 31 March 2019 through monthly instalments”.
It added: “If they fail to do so, Ofgem is ready to issue a final order to require full payment.”
Asked why Ofgem had launched investigations into two of the suppliers and not into the other two, the spokesman for the regulator said: “We looked at the options carefully in each case, in line with our enforcement guidelines. We have required URE and Eversmart to make payments in line with a repayment plan, which will accrue interest. If they fail to make these payments we have said that we will issue them with a final order to make the payment.”
He added: “URE and Eversmart both initially made proposals to us to repay the money by instalments. We have contacted them both setting out the terms we expect to be met – monthly by 31 March 2019.”
Spark works with letting and estate agents, large social landlords and property managers to supply energy to tenants.
In April last year, Spark became a multi-utility supplier when it acquired Home Telecom, a Sussex-based broadband company.
Energy supply remains by far the biggest part of Spark’s business. The Borders company has around 15,000 home telecom customers.
In late 2016, First Minister Nicola Sturgeon officially opened The Spark Academy. This in-house training centre is located at Spark’s headquarters in the former Ettrick Riverside tweed mill.
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