High Court to decide on share-out of cash from failed UK power groups

The former owners of some of the UK’s collapsed energy suppliers and their creditors will find out who is entitled to receive hundreds of millions in payouts in a landmark case that started in London’s High Court on Tuesday.

Administrators for nine of the collapsed companies led by consultancy group Alvarez & Marsal have brought the case to determine how they should distribute the money recovered from the likes of Avro, People’s Energy and Utility Point.

The cash could go to public bodies, to creditors and in some cases to shareholders depending on how rules set by regulator Ofgem are interpreted.

In a written submission to the High Court, Mark Phillips KC, barrister for the administrators, said the insolvencies had “highlighted a number of hitherto unidentified questions about what their precise obligations were under the statutory regime governing the supply of electricity”, which needed to be considered by the court.

Questions included whether the insolvent companies still needed to pay towards government schemes such as renewable obligations certificates — a system designed to encourage green power generation.

The case has arisen because Ofgem’s rules are untested in insolvency and open to interpretation. In some instances, such as with People’s Energy, there is money left over even after payments to creditors, because administrators sold energy hedges that had been bought before the sharp rise in wholesale gas prices last year.

Although customer credit balances — bills paid by direct debit — are protected by law, there is also a question as to how cash received prior to the administration should be treated in the insolvency.

Any decision leading to shareholders receiving money could spark outrage from consumer campaign groups. Although the companies that took over the customers of failed suppliers were able to recoup the costs, every household in the country is paying for the transfers through £94-a-year supplements on their energy bills.

Almost 2.4mn customers have been moved to new suppliers following the collapse of 29 energy companies since January last year.

The case covers companies including People’s Energy, PFP, Avro, Utility Point, Green, Igloo and Neon Reef but it could lead to the administrators of other collapsed companies making claims.

One insolvency specialist close to the court case said there was a lack of clarity over how the regulator Ofgem’s own complex rules interact with UK insolvency laws, saying “there are different interpretations of how it could be treated”. 

A&M declined to comment on the case. The hearing continues and is due to last until Friday.