Despite the infrequency of supplier failure, there are rules in place from the energy regulator to protect consumers in the unlikely event a 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 won’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?
Customers paying by direct debit typically build up debit during the winter and credit during the summer. It’s not unusual for a customer to have a credit of more than £100 at the end of summer, prompting new rules from Ofgem to protect customers who may be in credit at the time of a supplier failure. However, if you try to switch to a new supplier before your SoLR has been confirmed, you may lose any credit balance you had.
How does Ofgem select the new supplier?
Ofgem says that their 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.
So … 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
- Their call centre capability
- Whether they will voluntarily reimburse any customers’ credit balances
Ofgem emphasises that the decision will always be made on a case-by-case basis, but has stated in the past that the most likely SoLR would be among the big six: British Gas, EDF Energy, E.ON, npower, SSE or ScottishPower.
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.
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.
For those who do stay with the SoLR, the new “deemed contracts” (this simply means a contract you have not chosen, but has been chosen for you) will last no longer than six months. At that time, the rates must change to the supplier’s “normal rate” (likely their current standard variable rate).
Will I pay the same as I did with my old supplier?
It is likely that your prices will increase.
A supplier of last resort will have to work quickly to secure additional wholesale gas and electricity on short notice, which is likely to come at a high cost to them. The supplier also takes on the additional admin costs of notifying customers and fielding questions, which puts strain on their services.
While it is recognised that the SoLR will have additional, unexpected costs, the new supplier must still prove to Ofgem that the rates it puts in place for its new customers reflect no more than the “reasonable costs of supply … together with a reasonable profit.”
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.
Under the rules, if the supplier of last resort cannot take responsibility for the new customers’ credit as well as their energy supply, then the credit balances would still be honoured to the customer by the supplier, and the supplier would be reimbursed by spreading the cost across all UK energy customers’ bills via an industry levy.
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.
What if I’m a prepayment customer?
Prepayment customers may be particularly vulnerable during the transfer process, as they may need emergency credit applied to their account and/or may lose their top up token or key.
But, just like credit customers, traditional prepayment customers 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.