A struggling household energy supplier switched thousands of unprofitable customers to rival companies without their express consent, in an apparent bid to avoid financial collapse.
Omni Energy wrote to customers earlier this month, warning them that it was “highly likely” the business would buckle under the weight of record high gas prices. It advised them to switch supplier and said it would do so on their behalf unless they objected.
With wholesale prices at record highs, customers are paying less for gas than suppliers can buy it, meaning households that use a lot of energy are costing suppliers such as Omni large amounts of money. Since the beginning of August, 10 suppliers have fallen into insolvency and Omni is hoping to avoid the same fate.
Ofgem, the energy regulator, does not permit suppliers to switch customers without their consent, except as part of a takeover of all or part of a business. But the Guardian has seen communications indicating that the company began manually signing customers up with rival suppliers such as Bulb and Scottish Power without telling them, using their personal details to open new accounts.
Both Bulb and Scottish Power have investigated the switches and are cancelling them, meaning the customers will revert to Omni.
One industry source said they were “utterly speechless” at what had happened and suggested the “outrageous” behaviour may have breached data protection laws, as well as energy regulator Ofgem’s licence conditions.
It is estimated that as many as 3,000 customer accounts, roughly 1,600 households, may have had their accounts moved without their knowledge.
“I’ve never seen anything like this … it’s an omnishambles,” they said, adding that it illustrated the need for better regulation of the sector.
A source familiar with Omni’s actions said that senior executives at the company had spent days switching hundreds of customers at a time, focusing on the highest energy users.
UK industry could face shutdowns as wholesale gas price hits record highRead more
The source said the company hoped that by offloading the most burdensome customers it could ride out the gas price spike without collapsing. But they said Omni was deliberately not telling customers about the switch.
They also said Omni had turned off its customer helpline, making it harder for people to find out what was going on. When the Guardian called the number, an automated message said it was only fielding emergency calls.
Ofgem is understood to have intervened, ordering Omni to stop switching customers without their express consent.
Gas prices, blackout risk and switching: your questions answeredRead more
An Ofgem spokesperson said: “Suppliers generally cannot switch customers away without their consent, except where a supplier sells some or all of its customer book as part of a trade sale to another supplier.
“In the event any supplier fails, Ofgem has robust systems in place and our safety net ensures customers’ electricity and gas supply continue and protects their credit balances.”
At an industry conference on Thursday, Ofgem boss Jonathan Brearley admitted the regulator needed to do more to examine the business models of new entrants to the energy supply market.
The regulator has faced criticism for allowing energy startups to serve customers without building up the resilience to survive gas price shocks that have capsized suppliers.
A ScottishPower spokesperson said: “We’re aware of the apparent switching of Omni Energy customers to other suppliers, including ScottishPower, and taking appropriate action to minimise the impact on affected customers. Ofgem has been advised of this.”
An Omni Energy spokesperson said the company “may have” breached the GDPR data protection rules but that it had “acted in good faith” and had now contacted all customers to obtain their consent for switches.
They said Omni had “always provided our customers with accurate information regarding their energy supply”.
Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
“We have always acted in the best interest of our customers and wanted to ensure that they do not have any metering issues during the transition period. We decided to use in-house resources rather than a third-party switching partner to complete this.
“We have had a lot of positive feedback to this email and the service that we have provided to our loyal customers. We have today provided an update to our customers that no switch will complete without their confirmation.
“It is a very difficult time for Omni Energy and we have had to make several redundancies in the past weeks as we have made efforts to restructure our business. We are in active dialogue with Ofgem.”
