Ofgem has confirmed that those paying energy bills are set to get much stronger financial protection under a new rule. They have stated that if an energy supplier is due to go bust, then the failed supplier will be responsible for the costs involved in transferring customers to new firms, rather than the customer having to do so.
Strengthening the Financial Protection of Customers & Resilience of the Energy Sector
Director General for Markets at Ofgem, Tim Jarvis, has said that the reforms “make sure shareholders do not benefit” before the supplier company’s customers if the supplier company ever goes bust.
The new rule is put in place to strengthen the financial resilience of the whole energy sector after dozens of firms collapsed when energy prices spiked after the Russian invasion of Ukraine in 2022.
Supplier of Last Resort (SoLR) Levy Offset
Ofgem launched the SOLR levy on Tuesday. Here is what you need to know:
- When an energy supplier goes bust, it will have to pay the SoLR levy costs for moving its customers to another supplier.
- The surviving suppliers will not have to pay.
- If the failed supplier has any assets, those assets will be sold during the insolvency period to pay back creditors.
Tim Jarvis went on to say:
Protecting consumers remains our number one priority and the reforms we have implemented since the energy crisis to stablise 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 the consumers.”
Shareholders Will Not Benefit
Thanks to this new rule, it will be ensured that shareholders will gain nothing from an insolvency process until the costs of keeping their customers in supply have been covered. Earlier in the year, Ofgem introduced new rules that made gas and electricity suppliers financially secure.
They also set a financial buffer to require energy firms to withhold a sum of cash that can help them withstand disruption periods in the market and huge changes in prices.
Though Ofgem is working for the security of the energy consumer, there are ways you can fortify yourself even further. Government grants are available to help you with your energy bills; you could get free energy upgrades, including solar panels and insulation. Fill out are form below to find out if you qualify.
