Blog Post

Tonik Energy ceases trading as it fails to pay Renewables Obligations

Richard Simmonds • Oct 06, 2020

Tonik Energy has ceased trading just a few days after being put on a list of energy suppliers who failed to pay their Renewables Obligations by Ofgem’s deadline.

What happened?

Tonik Energy was one of the seven energy suppliers listed by Ofgem as having failed to meet the deadline to pay its Renewables Obligations.

Tonik was also one of the two energy suppliers along with Robin Hood Energy who had failed to pay for the Feed-in-Tariff levelisation scheme to the sum of £158,814.47.

The Renewable Obligations payments have claimed the scalps of several energy suppliers and often the inability to make the payments before the deadline passes is a sign that the supplier is in financial difficulty.

Covid-19 Pandemic taking its toll

Many smaller energy supply companies are operating on thin profit margins and the double whammy of the RO payments and the Covid-19 pandemic has proven too much for Tonik Energy.

The Covid-19 lockdown has also resulted in many customers delaying or missing payments, leaving some energy suppliers without the cash flow to keep their day to day operations going. With the government’s furlough scheme due to end this month concerns over bad debt and customers inability to pay their energy bills is on the rise.

What happens to Tonik Energy customers?

With the collapse of Tonik Energy, its 130,000 customers Ofgem will choose them a new supplier known as the Supplier of Last Resort (SoLR).

Tonik’s customers should hold off switching until they know who their new supplier will be and what tariff they will be offered. The process is often quick with customers notified who their new supplier is within a few days.

“Tonik Energy customers do not need to worry, as under our safety net we’ll make sure your energy supplies are secure and domestic customers’ credit balances are protected. Ofgem will now choose a new supplier for you and whilst we are doing this our advice is to ‘sit tight’ and don’t switch. You can rely on your energy as normal,” said Phillipa Pickford, Ofgem’s director of retail.

What is SoLR?

SoLR powers were introduced in 2003 to reduce the negative impacts to consumers of an energy supplier going belly up.

With the powers, Ofgem can ensure customers of the failed supplier continue to receive energy and ensure a smooth transition period to a new supplier.

With the energy supply market being highly competitive there are always bound to be a few casualties. In the event of a supplier failing, Ofgem will assign another energy supplier to take over the failed suppliers’ customers.

Suppliers bid on becoming the SoLR and Ofgem will assess whether the bidders are suitable. In this case, they will assess whether a bidder has the infrastructure needed to handle an extra 130,000 customers.

Also read: What is a Supplier of Last Resort (SoLR)?

How can a SoLR reassure customers?

An energy supplier that becomes the SoLR will need to reassure its new customers that they will be well looked after and given reassurances.

Winning the trust of these new customers is key to ensuring they stay with their new supplier as many will no doubt be seeking to switch to another at the earliest opportunity. Communication is key to this, so the SoLR will need to keep the customers informed throughout the process via emails, letters and social media posts.

The messaging also needs to be clear as many of the customers will no doubt be confused and worried.

With winter rapidly approaching those customers on the Priority Service Register (PSR) should be taken care of quickly and assured that their energy supply is safe.

Also read: Add your Customers to the Priority Service Register with Dyball’s CRM