Ofgem safety net protects consumers’ cash

Publication date
26th October 2016
Information types
Policy areas
  • Customers’ credit balances are now protected under new Ofgem safety net if supplier becomes insolvent.
  • Customers can also be confident that their energy supply is guaranteed.

Ofgem has put in place a new safety net to protect consumers in the unlikely event their supplier goes out of business.

The existing “supplier of last resort” regime already guarantees that people will continue to receive their energy supply.

Following the consultation which began in June, Ofgem has now taken action to protect customers’ credit balances as well to give full peace of mind when choosing a supplier.

It’s rare for a supplier to go out of business. If it happens, under the supplier of last resort process, Ofgem appoints a replacement supplier to ensure that customers continue to be supplied with energy.

But there may also be a risk to customers’ money if their account is in credit.

As direct debit payments spread the cost evenly throughout the year, customers typically build up credit during summer which might peak at just over £100. This credit covers the cost of customers using more energy during the winter.

As unsecured creditors, these customers are unlikely to get their money back if their supplier becomes insolvent.

However, under the new safety net, Ofgem will now take into account who can best protect consumers’ credit balances as part of the process for selecting a replacement supplier.

Where necessary, Ofgem would allow the replacement supplier to recoup the cost of reimbursing the credit balances through an industry levy.

This levy, which would be spread across all energy customers, would only have a small impact on bills. 

Ofgem’s senior partner for Consumers and Competition, Rachel Fletcher said: “It’s important that people are fully protected in the unlikely event a supplier goes out of business. Our safety net gives peace of mind so they can have complete confidence to shop around for the best deal.”

Ofgem offers simple and impartial advice on how to get a better deal via www.goenergyshopping.co.uk

Notes to editors

  1. Read our guide for consumers on how Ofgem’s safety net works.
  2. Read our June consultation: Our proposed approach to dealing with supplier insolvency and its consequences for customers.
  3. Read our decision letter: Decision on our approach to dealing with supplier insolvency and its consequences for customers.

About Ofgem

Ofgem is the independent energy regulator for Great Britain. Its priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating networks.

For facts, figures and information about Ofgem’s work, see Energy facts and figures or visit the Ofgem Data Portal

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Further information

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Tim Webb 020 7901 7179

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