While many energy suppliers operate without any issues, small suppliers do go out of business periodically, and that number could rise dramatically in the next few months given the state of the energy market. However, customers should be assured that are rules in place from the energy regulator to protect them in the event that their supplier goes out of business.
In short, if this happens, Ofgem will appoint a new supplier — referred to as the supplier of last resort, or SoLR — for the affected customers. This new supplier will be vetted by Ofgem and appointed as quickly as possible to ensure that customers don’t experience any disruption in their gas and/or electricity service.
Do I need to do anything?
Take meter readings as soon as you're aware that your supplier has ceased trading, as you'll need these for your new supplier (the supplier of last resort).
Will my gas or electricity supply get cut off?
No. Ofgem’s “safety net” ensures your energy won’t be cut off in the event your supplier goes out of business.
What if I’m in credit to my energy supplier at the time?
Your new supplier will honour any credit you had built up with your old supplier under Ofgem's SoLR rules. It takes time for your account and your balance to transfer, so if you want to switch away from the appointed supplier, it is best to wait until your account with them is set up.
How does Ofgem select the new supplier?
Ofgem says that its top priority in choosing the SoLR is “to ensure that all customers continue to receive supplies of gas and/or electricity.”
There are several requirements that the supplier must meet but, essentially, the supplier must show it has the ability to take on the new customers quickly and efficiently, and without significantly impacting their existing customers.
The supplier of last resort must also show it has the means and ability to secure enough gas and electricity to supply these new customers without significant cost to those customers.
Ofgem will also take into account whether a supplier will voluntarily reimburse any customers’ credit balances when selecting the SoLR.
If no such supplier volunteers to accept the customers of a failed supplier, Ofgem will appoint the supplier they deem best suited to the job.
Who is the new supplier likely to be?
Ofgem will review the profile of the existing customers of the failed supplier to determine which supplier is best positioned to take them on, taking into consideration things like:
- The supplier’s ability to handle issuing bills without delay
- Its call centre capability
- Whether it will voluntarily reimburse any customers’ credit balances
In the most recent example, Avro Energy and Green ceased trading in September 2021 with their customers transferred to Octopus and Shell Energy respectively. PfP and MoneyPlus had already gone out of business earlier in the month, and British Gas was appointed as the supplier of last resort for the suppliers' combined customer base of 100,000.
What if I don’t want to be with the Ofgem-appointed supplier of last resort?
There is no requirement to stay with a supplier of last resort but it's best to wait until your account is set up with the new supplier before you switch.
Once Ofgem has appointed the new supplier, this supplier will take on the task of informing the customers of the change. This notice will also explain that customers are free to compare all energy suppliers and switch to a better plan at this time. You will be placed on a tariff with no exit fees so you will not have to pay extra to switch.
Will I pay the same as I did with my old supplier?
Ofgem will appoint a supplier that offers the best possible deal for customers. However, it is not guaranteed that the new tariff will be the same as your old one so your bill could go up.
Your new tariff will not have any exit fees so once you have been appointed a new supplier and your account is set up with them, you can compare prices and switch if you're not satisfied.
What if I was on a fixed rate plan?
Unfortunately, the fixed rate contract you were on will end at the time you’re moved onto the supplier of last resort.
You will be placed on a new “deemed contract” with the new supplier. However, this deemed contract will not have any early exit fee, which means you are free to find and switch to a new plan whenever you wish.
What if I’m in debt to my supplier?
Your energy debt will not transfer to your new supplier. However, according to Ofgem, you may still need to continue to pay it off to the old supplier, even if they have gone out of business. The administrator will contact you in due course about the money you owe.
What will happen if I'm mid-switch between two suppliers and they both go bust?
It depends how far along in the switch you are - if it's been completed, you would be transferred to the SoLR for the supplier you'd decided to switch to. If it hasn't, you'll go to the SoLR for the supplier you were in the process of leaving. To reiterate, though, your energy supply won't be affected.
What if I’m a prepayment customer?
Just like credit customers, customers with prepayment meters are protected by the safety net. Prepayment credit balances are already protected - any money which has been loaded onto their meter can be used as normal. As a priority, their new supplier will send them any new keys or other equipment needed to top up their meter and they should continue to use this as before.
If people need to top up their meter before they get their new key they should contact their new supplier. The supplier of last resort will understand the particular difficulties associated with supplying PPM customers, and will have already proven to Ofgem to have robust systems in place to help them as quickly and efficiently as possible.
Will I still receive the Warm Home Discount from my new supplier?
If you receive the Warm Home Discount, your new supplier should honour this too. If you're a previous customer of Green Network Energy, EDF Energy will continue to pay all Warm Home Discount payments, whether you're in the core or broad eligibility group. You'll receive more information about this from your new supplier.