Householders will gain stronger financial protections under the regulator’s latest reforms
Failed energy companies will be liable for the costs of transferring their customers to new suppliers under latest reforms announced by Ofgem.
The Supplier of Last Resort (SoLR) Levy Offset rule ensures energy customers are shielded from the cost of supplier failures.
It will ensure the costs claimed by energy companies under the SoLR levy, for taking on customers from firms that go bust, will be the liability of the failed supplier – a move that could save households money.
This will be recovered through the insolvency process where the failed supplier has residual assets available to pay creditors.
The latest move follows the collapse of dozens of energy suppliers in the wake of surging global gas prices as a result of Russia’s invasion of Ukraine in 2022.
“Tim Jarvis, Director General, Markets at Ofgem said: “Protecting consumers remains our number one priority and the reforms we have implemented since the energy crisis to stabilise the market mean suppliers are better placed to weather any shocks.
“However, like in any healthy and competitive market, energy companies will still fail from time to time and when they do it’s right that they cover the costs first, not consumers.
“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.”
The reform follows a series of interventions by Ofgem to drive up financial resilience in the market, including the introduction of minimum capital target rules and rules giving Ofgem the power to direct suppliers to ringfence customer credit balances when in the consumer interest.
This has resulted in suppliers moving from net negative assets during the crisis to a positive £7.5 billion of adjusted net assets.
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