Hundreds of thousands of families face possible price rises after collapsed energy firm’s takeover 

More than half a million customers of a collapsed energy supplier face price rises after a rival firm agreed to take over providing their gas and electricity.

Octopus had been chosen to take on Avro Energy’s clients after a ‘competitive process’, energy watchdog Ofgem announced yesterday. 

Avro, which had 580,000 customers, was the largest of several companies to go bust this month after the wholesale price of gas soared. A total of 1.5million households have seen their supplier collapse.

Under the ‘supplier of last resort’ system, outstanding credit balances owed to existing and former Avro customers will be paid and householders transferred to Octopus will be protected by the energy price cap.

But customers who were on cheaper fixed price deals, signed before the gas price rise, could see bills jump by hundreds of pounds. The annual price cap is set to rise to £1,277 from October for a typical household.

Customers are able to change supplier or tariff without exit fees after the switch-over, which took effect yesterday, but may struggle to find equivalent deals.

Octopus, which had 2.5million customers before the takeover, has also emerged as a potential buyer for Bulb Energy, which supplies 1.7million homes. 

There are fears the system is leading to higher prices for consumers as Octopus will be able to recoup all costs incurred, including buying energy for Avro customers at inflated prices, which is paid for with a levy that falls on consumers.

More than half a million customers of a collapsed energy supplier face price rises after a rival firm agreed to take over providing their gas and electricity

The cost of moving customers of failed firms is expected to mount as Ofgem makes arrangements for almost a million from other bust firms. 

Last week Scottish Power chief executive Keith Anderson warned customers could foot a bill running to ‘billions of pounds’ due to the chaos. The Government has shied away from offering energy firms a bailout despite concerns few are strong enough to take on transferred customers. It comes after a move to less reliable wind and solar power left Britain at the mercy of international gas markets and re-ignited the debate over energy security.

Yesterday it emerged ministers are considering a ‘change of focus’ to nuclear as a more reliable green energy source. The Government has been criticised for not replacing ageing reactors sooner, with the UK to lose more than a fifth of nuclear power generation when two plants are retired next year.