How you’re protected when energy firms collapse

24 Sep 2021 01:39 PM

The recent increase in wholesale global gas prices is impacting many countries as we recover from the impacts of the COVID-19 pandemic. These are unprecedented times, and we may see more suppliers than usual exiting the energy market.

When suppliers exit the energy market, they will usually arrange to transfer their customers to another supplier through a trade sale. Ofgem has a range of powers we can use to step in and protect households and businesses when suppliers leave in an urgent or unplanned way, for example due to serious financial difficulties. These provide a safety net, ensuring you are seamlessly transferred to a new energy supplier with no disruption to your energy supply. They also protect household credit balances, so any money you are owed is returned.

Our powers include appointing a ‘Supplier of Last Resort’ (sometimes called a ‘SoLR’). If this is not feasible, we can also ask the government for an 'Energy Supply Company Administration Order' which would put in place a 'Special Administration Regime’ (‘SAR’).

Are energy supplies at risk?

The UK has one of the most secure and resilient energy systems in the world. Our energy systems continue to operate reliably. Alongside government – who sets the long-term direction for the UK’s energy policy – we are confident there is no increased risk of supply emergencies this winter.

Our main message to customers is not to worry. We have robust processes in place to ensure that if a supplier fails or exits the market, your gas and electricity supply will continue. In fact, you won’t notice any change, other than a new supplier being appointed for you. Any credit balance you may be owed on your household energy will also be returned. 

What is the ‘Supplier of Last Resort’ (SoLR) process?

This is when Ofgem directs any gas or electricity firm to take on a failed supplier’s customers. When we choose a supplier, we must be satisfied that they can supply additional customers without significantly prejudicing their ability to continue to supply their existing customers.

We choose the new supplier following a competitive process designed to get the best deal for you. Household credit balances are protected.

If your supplier goes out of business, our advice is to take a photo of your meter reading then sit tight and wait to be contacted by the new supplier we appoint. Learn more in our guide for households and guide for businesses.

Could bills go up?

When we appoint a new supplier using the Supplier of Last Resort process, we try to get the best possible deal for customers.

Suppliers we appoint will likely put you on a special ‘deemed’ contract when they take on your supply. This means a contract you haven’t chosen. A deemed contract could cost more than your old tariff, so your bills could go up. However, they are covered by the energy price cap Ofgem sets, which ensures you get a fair price if you are put on one. 

When contacted by the new supplier, it’s best to ask to be put on their cheapest tariff or shop around if you want to. You won’t be charged exit fees. This is a challenging time in the market and we know that there may not be many tariffs available when shopping around right now.

Deemed contracts can cost more because the supplier takes on more risk. For example, they might have to buy extra wholesale energy at short notice for new customers. So they charge more to cover these costs.

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