This Memorandum of Understanding sets out how the Government and Ofgem would work together to make sure households continue to receive an uninterrupted supply of energy in the unlikely event of a large energy supplier going into administration.
Energy Supply Company Administration is a special administration regime for large energy supply companies. It ensures uninterrupted and safe operation of essential services in the event of a large energy supply company becoming insolvent.
It is a contingency measure in case Ofgem is unable to appoint a Supplier of Last Resort, which is used when a smaller energy supplier becomes insolvent. The special administrator, unlike an ordinary administrator, has an obligation to consider consumers’ interests as well as creditors.
Provisions for this administration scheme for energy suppliers were included in the 2011 Energy Act. It has never been used before because a large energy supplier has never been insolvent.
A Memorandum of Understanding (MoU) has been developed to set out the detail of how the three organisations: BEIS, Ofgem and HM Treasury will work together.
This sets out roles and responsibilities for these organisations and establishes a co-ordination framework, information sharing and communication between them in response to the financial distress of an energy supplier.