We are consulting on our proposed approach to dealing with supplier insolvency and its consequences for customers.
Electricity and gas is supplied in Great Britain through a competitive process. Competition benefits consumers, but it can lead to suppliers to fail in the same way as companies can fail in other markets. It is not our responsibility to intervene to prevent suppliers from becoming insolvent but we think it is important to have protections in place for consumers given that electricity and gas are essential services.
When a supplier fails our focus is to ensure continuity of supply for its customers and avoid wider negative effects on the market. We can do this through the Supplier of Last Resort (SoLR) process or, where this is not feasible, through use of powers to seek the appointment of an energy supply company administrator (an energy administrator).
In the event of insolvency, there may however be financial implications for the failed supplier’s customers. Some customers’ accounts are likely to have a credit balance at this time. Without regulatory intervention, they are unlikely to receive all (or possibly any of) this money back from the failed supplier.
Our existing SoLR powers can be used to give some protection to consumers’ credit balances in the event of a supplier’s failure. We are seeking views on our draft revised guidance to clarify this. We are also considering further updates to our guidance, which was last published in 2008, to reflect the extension of the energy company administration regime to suppliers which took place in 2011 and other changes to the industry.