Ofgem to protect households from cost of energy supplier failures

Households won’t have to pay the cost of moving to a new energy supplier if their current one fails.

Under a new rule being introduced by Ofgem, failed suppliers will be liable for the cost of transferring their customers elsewhere.

Tim Jarvis, director general of markets at the watchdog, stated that suppliers are “better placed to weather any shocks” since reforms were introduced following the energy crisis.

However, he acknowledged that energy companies will still fail “from time to time”.

“When they do, it’s right that they cover the costs first, not consumers,” Mr Jarvis commented.

“Protecting consumers remains our number one priority.”

Mr Jarvis added that the new rule will make sure shareholders don’t benefit from an insolvency process until the costs of keeping their customers on supply have been covered.

What does the new system look like?

Ofgem has introduced the new Supplier of Last Resort (SoLR) Levy Offset rule to protect households from the financial fallout when energy companies go bust.

This allows surviving energy firms to claim back the cost of onboarding new customers after a collapse. 

But now, any such claims will first be directed toward the failed supplier’s remaining assets - before creditors or shareholders see a return.

“This new rule will make sure shareholders do not benefit from an insolvency process until the costs of keeping their customers on supply have been covered,” said Mr Jarvis.