By Ian McConnell Group Business Editor
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.
Ofgem yesterday launched investigations into Spark and another supplier,
Economy Energy, over non-payment of sums due under the renewables
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.
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
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
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.