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Ofgem threatens to scrap licence for five energy suppliers

Regulator Ofgem has said it could suspend the licences of five energy suppliers who failed to pay into a scheme to fund small-scale renewable generators.

Suppliers are obliged to fund the Feed In Tariff (FIT) scheme, which is administered by Ofgem, but Colorado Energy, Igloo Energy Supply, Neon Reef, Whoop Energy and Symbio Energy have so far failed to do so for this year.

They owe a collective £765,000 to the scheme, with Igloo alone responsible for nearly half of the total.

The FIT scheme was first introduced in 2010 as a way to encourage property managers and organisations to generate their own renewable electricity using technology such as solar panels or wind turbines, and feeds any surplus back to the grid.

The Government has estimated that FITs support small-scale low-carbon generation that would cost £8.6bn up to 2030 and produce monetised carbon savings worth £0.42bn.

The scheme was closed to new entrants in 2019, but those already part of it are still being funded by the levy on energy firms.

“If the suppliers fail to comply with the order made against them, Ofgem may take further enforcement action and they could end up having their licences revoked or facing a financial penalty,” Ofgem said in a statement.

While the FIT scheme has now been discontinued, it was replaced by the Smart Export Guarantee (SEG) which came into force from 1 January 2020. Although not a direct replacement, the new initiative still provides rewards to solar generators for electricity exported to the grid.

Many smaller UK energy suppliers are currently struggling to maintain solvency due to a double whammy of high wholesale gas and electricity prices coupled with the energy price cap designed to protect the most financially vulnerable people.

Gas prices have reached record highs due to a number of factors including rising global demand as economies start opening due to the ease in Covid-19 restrictions, a cold winter last year which depleted gas reserves, and a reduction in gas supplies from Russia to central Europe.

Wholesale electricity prices also soared last week after a fire at an interconnector linking the French and British power networks.

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