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 they 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.
Ofgem’s powers include appointing a ‘Supplier of Last Resort’ (sometimes called a ‘SoLR’). If this is not feasible, they can also ask the government for an ‘Energy Supply Company Administration Order‘ which would put in place a ‘Special Administration Regime’ (‘SAR’).
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 they choose a supplier, Ofgem must be satisfied that they can supply additional customers without significantly prejudicing their ability to continue to supply their existing customers.
They 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, Ofgem’s advice is to take a photo of your meter reading then sit tight and wait to be contacted.
Could bills go up?
When Ofgem appoints a new supplier using the Supplier of Last Resort process, they try to get the best possible deal for customers.
Suppliers they appoint will likely put you on a special ‘deemed’ contract when they take on your supply. This means a contract you have not 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 is best to ask to be put on their cheapest tariff or shop around if you want to. You will not be charged exit fees. This is a challenging time in the market and Ofgem knows 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.
If you want to ensure that your bills do not go up then visit the Utility Bidder website to compare tariffs.
What is a ‘Special Administration Regime’ (SAR)?
Ofgem are most likely to use a SAR if they cannot appoint a new supplier using the Supplier of Last Resort process, for example because of the size of the supplier that is in financial difficulty. In this scenario, a special administrator is appointed to run the company.