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RO mutualisation triggered for fourth year as supplier exits leave shortfall of £218m

25 of the 28 suppliers who failed to meet their RO payments have shuttered.

25 of the 28 suppliers who failed to meet their RO payments have shuttered.

Ofgem has confirmed that the mutualisation of the Renewable Obligation (RO) has been triggered, as continued turmoil in the energy supplier sector leaves a shortfall of £218,300,151.73.

Mutualisation – by which the shortfall in RO payments made to the regulator Ofgem in lieu of suppliers using renewable generation is distributed among suppliers who have made their payments – happens if suppliers reach this set threshold as they have done for the last three years.

The regulator redistributed the late payment for 2020-21 on 3 December, paying out a total of £58,375,203 to suppliers who presented Renewables Obligation Certificates (ROCs).

Suppliers each received £3.87 per ROC they presented, after the redistribution of the buy-out fund. They received an extra £0.55 per ROC out of the buy-out fund, making the final recycle value for 2020-21 £4.42.

The late payments were redistributed as such:

Obligation

Late payments made by suppliers

Late payments redistributed

England & Wales

£53,006,557.99

£53,007,910.00

Scotland

£4,546,397.47

£4,546,422.00

Northern Ireland

£820,874.93

£820,871.00

Total

£58,373,830.39

£58,375,203

Suppliers have until 1 September to present ROCs, or until 31 August to make buy-out payments to meet their obligations. Those who do not meet their obligations have until 31 October to make the late payments – including the daily interest penalty of 5.1% – in full.

On 1 November 2021, Ofgem issued two energy suppliers with final orders and five suppliers with provisional orders over a total of £17.9 million of outstanding RO payments.

This year, 37 supplier groups across 66 obligations failed to meet the 1 September deadline. Of these 12 obligations have now fully discharged by making the late payment deadline of 31 October, leaving 54 obligations not met.

The vast majority of these 28 suppliers – 25 of them – have either gone into administration or had their license revoked.

During 2021, 28 suppliers have folded largely due to high power prices meeting the price cap. This includes, Zog Energy, Social Energy Supply, Neon Reef, Omni Energy, MA Energy, Zebra Power, Ampoweruk, Bluegreen Energy Services, Goto Energy, Pure Planet, Colorado Energy, Daligas, ENSTROGA, Igloo Energy, Symbio Energy, Hub Energy, Green Network Energy, Simplicity Energy, Avro Energy, Utility Point, People’s Energy, PfP Energy and MoneyPlus Energy.

Ofgem will now look to recover the shortfall from the suppliers who discharged part or all of their obligation, through quarterly payments.

“For suppliers that did not meet their obligation, each will be considered on a case-by-case basis and further enforcement action may be taken as appropriate, which could result in a supplier having its licence revoked,” said Ofgem.

“Where suppliers have outstanding obligations and have ceased to trade, we will seek to recover outstanding payments due from them through the organisations’ administrators as appropriate.”

The shortfall for 2020/21 is a significant jump from the £33 million owned in 2019/20, when ten suppliers shuttered.

For a full list of RO shortfalls, see here.

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