Energy company faces losing licence over £3m debt

The UK energy market saw 28 companies fold in 2021 after a surge in wholesale prices

An energy company has been warned it could lose its licence if it cannot prove its financial stability.

Tomato Energy, based in Basingstoke with about 14,000 customers, has already been banned from taking on new clients following regulator Ofgem's investigation into debts exceeding £3m.

Tomato acknowledged "cash flow challenges" and said it was working with the regulator as it was "fully committed" to continuing as a business.

Ofgem has given the company three months to comply and revealed an additional report also highlighted serious customer service failings.

Ofgem began investigating the finances of Tomato Energy Limited after being contacted by firms considering legal action to recover debts totalling more than £3m.

The regulator implemented a sales ban, preventing the energy supplier from taking on new customers until it can demonstrate it was managing its finances in line with industry regulations.

In a statement, Ofgem said: "We will take robust action to protect consumers if we see evidence that energy companies may be failing to comply with our rules."

Tomato Energy released a statement following the warning in which it said: "The Ofgem order is a Provisional Order that we are fully aware of and have over the last few months actively been working with and in conversations with Ofgem to alleviate their concerns.

"We aim to continue to work with Ofgem to satisfy their concerns and address all outstanding issues, as we remain fully committed to support our customers and continue our business. "

In another investigation into Tomato Energy, Ofgem found "significant gaps in their customer service procedures".

The regulator confirmed the company had been ordered to pay £1.5m into the Voluntary Redress Fund, which supports vulnerable consumers.

Since its establishment in the 1990s, Ofgem said more than 40 small to medium-sized energy companies have gone out of business, with sharp increases in wholesale energy prices in recent years impacting the industry as a whole.