How are customers protected when a supplier collapses?

Its still unusual for an energy supplier to go out of business, but everything is possible and sometimes it happens. Luckily for everyone, there are procedures in place to make sure everyone involved is protected. 

If your energy supplier were to go out of business, Ofgem (Office of Gas and Electricity Markets) has to reallocate you to a new energy supplier. The new supplier is called an SoLR, which stands for Supplier of Last Resort. In January of 2021, Ofgem moved 360,000 customers to EDF when Green Network Energy folded. Ofgem has several factors to take into account when reallocating you to a new supplier which are:

  • Issue bills with no delays
  • Answer all call centre enquiries
  • Reimburse customers credit balances, and whether they will do this voluntarily.

This means that no matter who you get your gas or electricity from, there will always be a safety net to stop disaster striking.

The customers who have been transferred will be given a deemed contract, which must be similar to the contract you were previously on.  A deemed contract means you will usually be paying a very similar amount to your previous contract. However, the new supplier will be taking on a lot of customers, therefore the deemed contract might be more expensive than your old contract. This is because the new suppliers are taking a risk by buying a large amount of wholesale energy last minute to supply to you, therefore they want to make sure they are covered.

Ofgem recommends not switching supplier yourself, as this will be sorted by them automatically, and you will be shortly contacted by the new energy supplier (your SoLR) who will inform you of the change and any additional information. You don’t need to do anything if you don’t want to, it’s perfectly fine to stick with your SoLR, as usually it will be an incredibly similar service provided to you, but you do not have to stay with your SoLR. In fact, the initial contact from your SoLR will detail the options you have in switching to a supplier who better meets your needs.

All you will have to do is take a meter reading.

If you do choose to stay with the SoLR, after six months with them the deemed contract will end. You will then be given a contract on the SoLR’s normal rate. It is likely to be their standard variable rate, however, it is worth checking within that initial six month period how much you will soon be paying.

It is possible (under supply licence condition 9) to claim “last resort supply payment”. This means its possible to receive compensation for additional costs that might occur for you due to the switch from your old supplier to your SoLR.

You might be wondering (FAQ’s):

  • Will my supply be cut off?

No. The SoLR system means you will be switched to a new supplier automatically by Ofgem. You will be informed of this by your new supplier – the SoLR in question.

  • Will my smart meter stop working?

Most likely not. It should just carry on working with your new supplier. However, if it isn’t corresponding with your new supplier, it will exist only as a “traditional meter” until they can get a compliant meter to you.

  • Will my bills increase? 

Most likely not. Part of the process of choosing a SoLR is making sure that the costs are similar amounts to what you have previously been paying.

  • Should I cancel my direct debit?

No. Wait until your new supplier contacts you and they will tell you what (if anything) to do regarding your direct debit.

  • Will I lose my credit?

Most likely not. Another factor in picking your SoLR is attempting to pick an energy suppler that will provide a compliant service to your credit. However, the SoLR is not legally obligated to do this, so they may not – this is something to be aware of, but they will contact you to let you know how they will work it out between you.

  • Who do I pay my debt to?

You will have to pay someone. This might be your new supplier or your old one, dependent on how Ofgem, your old supplier and your new supplier have agreed to arrange things. You should wait until you are contacted by your new supplier to find this out. They will tell you.

  • What about my unresolved complaint?

You should raise the complaint with your new supplier and they will review it to see if it still relevant.

Before you settle with the provided supplier from Ofgem, it is probably a good idea to see if who you have been appointed to is the best deal, and as mentioned, you have six months with your SoLR to find out what the bills will look like after your deemed contract ends. It can’t be guaranteed that your bill won’t go up. Ofgem will do their best to find a similar supplier that will meet your needs and cause as little disruption as possible, but this can’t be guaranteed. Most people use comparison sites like Compare the Market and Money Supermarket to find the best deals. This is advisable – but only after you have heard from your SoLR.

For more information about this post and how Energy Solutions can help with your Electricity, Gas, or Water, click on the links, or check out the contact details at the bottom of the page.