If your energy supplier goes bust, do not worry. Ofgem guarantees your energy supply stays on in the UK.

This blog explains what happens if your supplier goes financially distressed. How your account is managed, the steps you should take and how to protect your credit balance. Follow these steps to transition smoothly to a new supplier without interruption.

What It Means When an Energy Supplier Collapse

When an energy supplier goes bust it means the company is no longer able to continue operating due to financial difficulties. This can happen for various reasons such as poor financial management, rising wholesale energy prices or regulatory failures.

The supplier cannot pay its debts and enters administration or liquidation.

You will not immediately lose energy. Ofgem the regulator keeps your supply running. If your supplier fails Ofgem Supplier of Last Resort procedure will appoint a new supplier to avoid any disruptions.

What You Should Do Step‑by‑Step

Should your energy supplier go out of business these easy steps will help you transition smoothly and maintain your energy supply.

1. Take a Meter Reading
   
   Take a meter reading immediately to ensure accurate billing with your new supplier.
   
   
2. Wait for Notification from Ofgem or Your New Supplier
   
   Ofgem or your new supplier will contact you with details of your new account, usually within a few days.
   
   
3. Check Your New Supplier’s Offer
   
   Review your new tariff as it may be more expensive. Compare options and switch if a better deal is available.
   
   
4. Compare Suppliers and Switch if Necessary
   
   You can switch suppliers without exit fees. Compare deals and move to a cheaper or better option if available.
   
   
5. Contact Your New Supplier if You Have Questions
   
   If you have questions about your tariff or billing contact your new supplier for support and guidance.
   
   
6. Monitor Your Bills
   
   Check your bills after the switch to ensure your meter reading is correct and you are paying the right amount.
   

By following these steps you can quickly adjust to the situation and avoid any unnecessary confusion or costs.

Ofgem’s Safety Net Explained

When an Energy supplier collapses, Ofgem safety net is designed to protect consumers and prevent disruption. This safety net primarily consists of the Supplier of Last Resort (SoLR) process which automatically steps in when a supplier collapses. Ofgem appoints a new supplier to take over the affected customer accounts ensuring their energy supply continues without interruption.

Under this process Ofgem ensures that you are transferred to a new supplier that will accept your existing contract and you will continue to receive the same energy service. Ofgem also guarantees that your credit balance is either refunded or transferred to your new supplier protecting your finances.

If you owe money to the failed supplier you will still need to repay it to the new supplier but no immediate penalties will be imposed.

What is a Supplier of Last Resort (SoLR)

A Supplier of Last Resort (SoLR) is a crucial mechanism put in place by Ofgem to protect consumers when their energy supplier goes bust. When a supplier fails Ofgem steps in to appoint a new supplier to take over the affected customers accounts. This ensures that the consumed energy supply is not interrupted.

The SoLR process is designed to be quick and efficient, minimizing disruption to households and businesses. The new supplier will generally take over your old supplier terms and conditions but you may be moved to a standard tariff or a temporary contract. After the transfer you can switch suppliers if you find a better deal.

While the SoLR supplier takes over your energy needs it is important to know that energy costs may be higher than your previous supplier rate as the new supplier may charge more to cover the risks of taking on customers from a failing supplier.

How to the New Supplier Works

The rule of Ofgem when your energy supplier collapses to the customer automatically transfers to the new supplier by process of SoLR.

Notification: You will receive a letter or email from Ofgem or your new supplier informing you that your account has been transferred to a new supplier. This usually happens within a few days of the failure.

No Disruption: Your energy supply will continue without interruption. There is no need to worry about losing power or gas during the transition.

Default Tariff: You will likely be moved to a standard tariff or a deemed contract which may be more expensive than your previous plan. This ensures you continue to receive service while you decide on your next steps.

Choice to Switch: Once transferred you have the right to switch suppliers at any time without any exit fees. It is a good idea to compare different energy tariffs to ensure you are getting the best deal.

Account Management: Your new supplier will take over managing your account including meter readings payments and any outstanding balances. If you have a credit balance it will be transferred to the new supplier or refunded.

What Happens to Your Contract and Tariff

If your energy supplier goes bust your contract ends automatically. Ofgem Supplier of Last Resort (SoLR) ensures a new supplier maintains your energy supply.

• Initially you will likely be placed on a deemed contract or standard tariff with the new supplier. This is a temporary arrangement designed to ensure service continues but these tariffs are often more expensive and can result in higher energy bills compared to your previous plan.
  

• Once transferred you can switch suppliers and find a more competitive tariff. You can shop around for a better deal and move to a new supplier without facing any exit fees or penalties even though you may be on a higher-cost default tariff.

It is important to note that while your previous supplier rates are no longer applicable, you will be protected by Ofgem’s energy price cap for the duration of the transition, ensuring that prices will not exceed a certain level.

What Happens to Your Credit Balance

If you have a credit balance with your energy supplier when it goes bust you are protected under Ofgem regulations. Your credit balance will either be refunded or transferred to your new supplier.

Here’s how it works:

• Refunds: If your old supplier goes bankrupt and you have a positive credit balance the administrator will work to either return your credit or transfer it to the new supplier. This ensures that you do not lose any money you have already paid in advance.
  
• Transferred Credit: In most cases your credit balance will be moved over to the new supplier appointed by the Supplier of Last Resort (SoLR).  You can expect the new supplier to factor in the balance when managing your account

• Claiming Your Refund: If your credit balance is not automatically transferred you can claim it back from the administrator of the failed company. In this case you will be notified on how to proceed to reclaim the funds.
  

• Outstanding Debts: If you owe money to the failed supplier this debt will still need to be paid to your new supplier but there will not be any additional penalties or interest rates just because the supplier has gone bust.

It is a good idea to keep a record of your final meter reading when the supplier goes bust to ensure everything is accurately accounted for.

How Existing Debt Is Handled

If you owe money to your energy supplier when it goes bust your debt does not disappear. The responsibility for paying any outstanding balances remains with you and it will be transferred to the new supplier under the Supplier of Last Resort (SoLR) process.

Here’s what to expect:

• Debt Transfer: Your new supplier will take over any outstanding debts and manage them as part of your Credit Rating If you are unable to pay your debt it may affect your credit rating. However most energy companies are willing to work with you to arrange reasonable payment terms to avoid this account. This means you will still be required to pay off the amount you owe but it will now be handled by the new supplier.
  
  
• Payment Plans: The new supplier may offer you a payment plan to help manage the debt. If you are struggling to pay. It is important to discuss options with your new supplier to find a manageable repayment solution.
  

• No Extra Penalties: Although you still owe the debt, there  will not  be additional penalties or interest charges just because the previous supplier has gone bust. The terms of your debt will remain the same as when you were with the original supplier.

Remember staying on top of your debt and discussing payment options with your new supplier as soon as possible will help ensure you do not face further complications.

When You Can Switch Supplier or Tariff

After your Energy supplier collapses and you are transferred to a new supplier under the Supplier of Last Resort (SoLR) process you have the freedom to switch suppliers or tariffs at any time. Here’s when and how you can make the switch

• Immediately After Transfer: Once you have been moved to a new supplier, you are not locked into a long-term contract. Even though you may be placed on a standard or deemed tariff you can immediately start comparing different suppliers and tariffs to find a better deal.
  
  
• No Exit Fees: Unlike traditional contract terminations there are no exit fees when switching after your supplier goes bust. This allows you to easily look for a more competitive tariff or supplier without worrying about additional charges.
  
  
• Better Deals: Since you are likely on a default tariff with your new supplier it is often best to start shopping around for a cheaper plan. Many comparison websites like Uswitch Compare the Market and Money Supermarket can help you find the best deals available.
  
  

• During the Transition: If you are in the process of being transferred to a new supplier you can still switch suppliers at any point. However make sure the transfer is complete and your new account is active before making the switch.

Switching suppliers as soon as you can after being transferred can help you avoid paying higher rates on a deemed tariff and potentially save you money on your energy bill.

Smart Meters and Prepayment Meters

If your energy supplier goes bust and you have a smart meter or prepayment meter the process for transferring your account to a new supplier will still ensure that you continue receiving energy without disruption. There are some key factors to consider

1. Smart Meters
   
   Your new supplier will manage your smart meter but there may be a temporary loss of smart features. You might need to provide manual readings until reactivation. Any disruptions will be brief and your energy supply will remain unaffected.
   
   
2. Prepayment Meters
   
   For prepayment meter customers your credit balance will be protected and transferred to your new supplier if your supplier goes bust. You may need to top up at a new location and your new supplier will provide a new key or card for continued payments.
   

Example of energy collapse in uk

Avro Energy collapsed in September 2021 after rising wholesale energy prices made its cheap fixed tariffs unprofitable. The company had not hedged adequately and could no longer afford to supply energy.

The regulator Ofgem transferred Avro’s customers to Octopus Energy ensuring no loss of supply and protecting customer credit balances.

Conclusion

In summary If your supplier stops trading the Ofgem Supplier of Last Resort (SoLR) process steps in to protect you and keep your energy supply running continuously. Your new supplier receives any credit balance and outstanding debts. While you may initially go on a deemed tariff you can freely switch suppliers at any time without exit fees.

To ensure a smooth transition take a meter reading. Wait for your new supplier to contact you. Compare available tariffs to find the best deal. Understand and exercise your rights to avoid higher costs or poor service.

By following these steps you will be well prepared to navigate supplier changes and protect your interests if your energy supplier goes bust.

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Frequently Asked Questions (FAQ)

These FAQs explain what happens if your energy supplier goes bust including your supply payments and next steps.