My energy supplier has closed down-what should I do?
Over the last year, more than 11 small energy suppliers. have been forced to go into administration. So what do you do if your energy supplier suddenly folds? Can you count on your supply? What about your credit balance? Should you keep topping up your pre-payment meter?
In general you can rest easy, as Ofgem's supplier of last resort (SoLR) process takes over and protects your energy supply and credit balance and allocates your account to a new supplier.
But there are a few things you should do to make the transfer as seamless as possible and ensure your energy costs don't rise:
In this guide:
1. Don't worry about your supply
If your energy supplier ceases trading, your lights won't suddenly cut out and your boiler stall. The energy used in your home isn't directly generated or supplied by your provider: they simply feed the required kilowatt hours into the National Grid to offset your use. When their operations power down, yours won't. Energy market regulator Ofgem's has a safety net to ensure your electric and gas supply will continue as normal.
2. Don't worry about your credit balance
Customers paying for gas and electricity with a direct debit will typically build up credit over the summer, as they keep paying averaged bills but their energy use declines. Therefore, it's not uncommon for households to be more than £100 in credit to their supplier as they enter the autumn.
If your supplier suddenly goes bankrupt, you may worry about the credit balance you've accumulated with them. Ofgem's safety net will again protect you, preserving your credit balance and transferring it to the new provider they appoint for you through the supplier of last resort (SoLR) process, which may reimburse you or credit it to your new account.
Be wary though: if you switch supplier before the supplier of last resort process is complete, you may forfeit that credit balance.
3. Keep topping up your pre-payment meter
If you have a prepayment gas and electricity tariff, the credit balance on your meter will also be protected. If you need to top up your meter to continue receiving gas and electricity, you can do that safely.
4. Take a meter reading
As soon as you find out your supplier has ceased trading, take a meter reading. You'll need to provide that to your new supplier when they contact you, to ensure you're appropriately charged for your gas and electricity use.
5. Don't switch supplier-yet
Ofgem advises anyone supplied by an energy firm that has recently gone bust to hold off switching until the supplier of last resort process is complete. If you do go ahead with a switch, you may lose the credit balance you have with your old supplier.
6. Ofgem will assign you a new supplier
Once an energy supplier folds, Ofgem assigns its customers to a new firm following a process called supplier of last resort (SoLR). Energy firms bid to be assigned these accounts and Ofgem selects among them.
Ofgem appoints new suppliers on a case-by-case basis, looking at the profile of the customers left stranded without a supplier. The regulator has state that the supplier of last resort will often by one of the Big Six, the large energy firms which maintain a 75% market share. But that isn't always the case and recently Ofgem has appointed smaller competitor supplier to take on new accounts.
The regulator says that its top priority in appointing a firm is "to ensure that all customers continue to receive supplies of gas and/or electricity." But it also wants bidders to demonstrate they can take on these new accounts quickly and efficiently and without impacting the service they offer to their existing customers. It will therefore consider their ability to issue accurate and timely bills and their customer service record. Ofgem also wants suppliers to offer these new customers competitive rates, despite the cost of securing more wholesale energy at the last minute and administering the transfer.
The regulator also considers whether these new firms will voluntarily refund the credit balances of their new customers.
The supplier of last resort process generally takes just a few days. Ofgem will announce the new supplier for the accounts on their website.
7. Wait until that new supplier gets in touch
Once appointed, your new supplier will get in touch with you. At this point, that supplier will inform you that you are free to compare energy tariffs and switch.
8. Compare energy and switch supplier
When your account is appointed to a new energy supplier, you'll be placed on a "deemed tariff," which will typically last for six months. The deemed contract will likely be more expensive than your previous tariff, especially if you have a fixed energy deal with your old supplier. Fixed contracts aren't transferrable. Additionally, the deemed tariff will be time-limited, typically lasting no more than six months, after which point you'll be reverted to your new supplier's standard variable tariff, which will be one of the most expensive they offer.
You can save hundreds of pounds a year by comparing energy tariffs and selecting a new deal from a new supplier. All customers should stay on top of their energy tariffs, regularly shopping around for savings. The failure of your energy supplier gives you a good opportunity to do so and trim your household bills.