What Happens If Your Energy Supplier Goes Bust in the UK?

If your energy supplier goes bust in the UK, your gas and electricity supply will usually continue without interruption. Ofgem protects customers through the Supplier of Last Resort (SoLR) process, which transfers accounts to a new supplier.

In this guide, you will learn what happens when an energy supplier fails, how your credit balance is protected, and when you can switch suppliers or tariffs.

What It Means When an Energy Supplier Collapses

When an energy supplier goes bust, it means the company can no longer continue operating because of financial problems. This usually happens when suppliers cannot afford rising wholesale energy costs or fail to manage customer pricing properly. In the UK, energy suppliers must follow rules set by Ofgem. If a supplier becomes insolvent or enters administration, Ofgem steps in to protect customers and maintain energy supply. Importantly, your electricity and gas will not suddenly stop. Instead, Ofgem appoints a new supplier through the Supplier of Last Resort (SoLR) process to take over customer accounts.

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 gas and electricity meter reading as soon as possible. This helps ensure:

Accurate final billing

Correct transfer of account information

Protection of your credit balance

2. Wait for Official Communication

Do not switch suppliers immediately.

Wait until:

Ofgem announces the new supplier

Your account transfer is complete

You receive confirmation from the new supplier

3. Check Your New Tariff

Most customers are placed onto a deemed tariff or standard variable tariff after the transfer. These tariffs may be more expensive than your previous fixed deal.

Unit rates

Standing charges

Contract terms

4. Compare Energy Suppliers

Once your transfer is complete, compare tariffs from other suppliers.You can switch without paying exit fees.

Comparing suppliers may help you:

Reduce energy bills

Find better customer service

Secure a fixed-rate tariff

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 customer’s 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 the New Supplier Transfer Process Works

Once Ofgem selects a new supplier, the transfer process begins.

Notification

You will receive:

An email

A letter

This communication explains:

Who your new supplier is

Your temporary tariff details

What happens next

No Supply Interruption

Your gas and electricity continue as normal. There is no need to worry about:

• Power cuts
• Gas disconnection
• Meter replacement

Account Transfer

The new supplier takes over:

Meter readings
Direct debit arrangements
Outstanding balances
Customer account management

Temporary Tariff

Most customers are moved onto a default tariff initially. This is temporary and gives customers time to:

Review prices
Compare suppliers
Choose a better deal

What Happens to Your Contract and Tariff?

If your supplier goes bust, your old contract automatically ends.

Your new supplier will usually place you on:

• A deemed contract
• Or a standard variable tariff

These tariffs are often more expensive than fixed deals.

However, UK energy regulations allow customers to switch suppliers without paying exit penalties.

You are also protected by the Ofgem energy price cap if applicable.

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.
   

Real UK Example: Avro Energy Collapse

One of the biggest UK supplier failures was Avro Energy.

Avro Energy collapsed in September 2021 after rising wholesale energy prices made its low-cost tariffs unsustainable. Ofgem transferred Avro customers to Octopus Energy under the Supplier of Last Resort process. Customers continued receiving electricity and gas without interruption, and domestic credit balances were protected. During 2021 and 2022, more than 30 UK energy suppliers collapsed because of the energy market crisis.

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.

For more detailed guides and the latest updates, explore our Energy Guide.

Frequently Asked Questions (FAQ)

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