Supplier of Last Resort: What Happens When Your Supplier Stops Trading

When an energy supplier stops trading, the thing most households want to know first is simple: will the heating still work tonight? The answer is yes. Ofgem's guidance is unambiguous on this point: if your energy supplier goes out of business because of financial problems, you will still have electricity and gas supplied to your home, and your energy supply will not be cut off¹. Behind the scenes, a formal process called the Supplier of Last Resort, or SoLR, swings into action. Ofgem appoints another supplier to take on the customers of the failed company, and the transfer can take up to 14 days to complete¹.

The second question is usually about money. If you were in credit, perhaps hundreds of pounds built up over a summer of direct debits, that credit balance is still protected by the rules Ofgem sets, and the new supplier will contact you about a refund¹. In the past, every Supplier of Last Resort appointed has committed to honouring the credit balances of customers who were owed money by the failed supplier². The process exists precisely because a competitive market with many suppliers, some of which will fail, needs a safety net that keeps households supplied and their money protected.

This page explains the whole process: what happens on the day a supplier fails, how Ofgem chooses the replacement, what happens to your tariff, your credit balance, your debts and your prepayment meter, what the process costs and who pays for it, and where it leaves gaps.

Understanding the Supplier of Last Resort scheme and its purpose

The Supplier of Last Resort process is Ofgem's mechanism for protecting the customers of an energy supplier that ceases trading. Its purpose, as Ofgem set out in a 2020 open letter on supplier resilience, is "to ensure continuity of supply for those consumers" and to prevent broader harm to the industry when a company exits the market³. Without it, the failure of a supplier with hundreds of thousands of domestic customers would leave those households with no contractual relationship with anyone able to sell them gas and electricity.

The process works because Ofgem runs a bidding process. Energy companies bid to take on the customers of the failed supplier, and Ofgem chooses between them¹. The winning bidder becomes the Supplier of Last Resort and inherits the customer base. This is not a rescue of the failed company: the old business is gone, its brand disappears, and its customers are simply moved across to a new, solvent supplier.

The scale of the process has been tested hard. Supplier of Last Resort costs surged in 2021 and 2022 before tailing off, according to the Welsh Government's response to Ofgem's call for input on standing charges⁴. That period saw a wave of supplier failures as wholesale gas prices rose faster than the price cap allowed suppliers to recover, and the SoLR process was used repeatedly to move large customer bases to new homes. The costs of those transfers, and who ultimately pays for them, are covered later on this page.

For a household thinking about energy independence, the process is a backstop rather than a benefit. It means the failure of a supplier does not leave you without power, but it also underlines the dependence involved in being a retail energy customer: your supply depends on a company staying solvent, and when one fails, decisions about who supplies you next are made by the regulator and the bidding companies, not by you.

The day your energy firm collapses: your supply keeps running

The first and most important fact is that nothing happens to your physical supply. Ofgem's guidance states plainly: "If your energy supplier goes out of business because of financial problems, you will still have electricity and gas supplied to your home or business. Your energy supply will not be cut off."¹ The wires and pipes into your home are run by network companies, not by your supplier, and the energy itself keeps flowing while the commercial arrangements are sorted out.

You also do not need to do anything to trigger the process. Ofgem states: "You do not need to do anything. We will choose a new supplier for you. This could take up to 14 days."¹ The transfer happens automatically, and the new supplier will contact you once it is complete. Until then, the practical advice is to keep using energy as normal and to take a meter reading, which is covered in detail in the steps section below.

Two protections kick in immediately. First, your credit balance: "If your supplier goes out of business, your credit balance is still protected by the rules we set, and the new supplier will contact you about a refund."¹ Second, if you had a complaint open with the failed supplier, you can discuss it with your new supplier when they contact you, and they will review the complaint and check whether it is still relevant or whether it can be closed¹.

There is one piece of advice from a real failure worth noting. When Toto Energy collapsed in October 2019, the Energy Ombudsman advised affected customers not to switch to another supplier until a new one had been appointed and had contacted them, and to take a meter reading ready for when the new supplier made contact⁵. The reasoning is straightforward: a switch initiated during the transfer window can complicate the process, and the meter reading gives you evidence of your position at the moment of failure.

How Ofgem chooses a replacement and the transfer timeline

Ofgem chooses the replacement supplier through a bidding process: "This is where energy companies bid to take on new customers."¹ The choice is not arbitrary. Ofgem's selection criteria include the type of energy originally supplied and who it was supplied to, and the ability of the bidder to supply new customers without affecting existing customers, arrange extra energy sources and take on new customers¹. A bidder that could not cope with the extra load, or that would put its own existing customers at risk, will not be chosen.

The timescale is set by the process itself. Ofgem states that choosing a new supplier "could take up to 14 days"¹. During that window your supply continues, and the practical limit on your end is simply waiting for the new supplier to make contact. Once appointed, the new supplier takes over the accounts, and the details that matter to you, such as your tariff and your credit balance, are settled in the weeks that follow.

The Energy Ombudsman describes the same arrangement from the consumer side: "Ofgem will appoint a SoLR" in order "to ensure consumers of the failed supplier have a continuous supply of gas and electricity."² The appointment is therefore both a consumer protection and an orderly wind-down mechanism, since the customer base, with its credit balances and debts attached, is transferred as a whole rather than dispersed.

One territorial limit matters here. The standard approach applies to both gas and electricity suppliers to residential users in the UK, excluding Northern Ireland². Northern Ireland has a separate energy market, and households there are covered by different arrangements, as explained on our page about energy suppliers in Northern Ireland.

Tariffs once you move over: fixed terms lapse and prices may shift

The transfer does not preserve your old deal. When a supplier fails, its tariffs go with it, and the new supplier will place you on one of its own tariffs, often a deemed or default rate until you choose something else. This is the point at which bills can change, and it is the main financial consequence of a failure for households that were on a competitive fixed deal.

The rules around exit fees explain the position. Ofgem's guidance on switching notes that you may have to pay your previous supplier an exit fee if you were on a fixed rate tariff and chose to leave before it ended⁶. But when the supplier fails and you are transferred, the situation is reversed in your favour: Ofgem's supplier failure guidance states that once the new supplier has been appointed, "you can switch to another supplier if you want to without any exit fees."¹ The failure of the company releases you from the fixed term.

How well households understand exit fees is patchy. Ofgem's 2024 research report on consumer tariff choices found that only 57% could identify that exit fees may still apply to a fixed contract even when moving to another deal with the same supplier⁷. That confusion matters after a supplier failure too, because the freedom to switch away from the appointed supplier without penalty is one of the strongest protections in the process, and many households do not realise they have it.

If you rent, the same freedom applies. Ofgem's guidance states that if you have to pay your energy bills, you can choose to switch your supplier or tariff at any time⁶. And when you do switch, the normal rules on credit apply: your old supplier will refund any credit in your final bill, and you could get compensation if they do not⁸. After a supplier failure, the refund route runs through the new supplier instead, as part of the credit balance protection described above.

Money and meters after a transfer: what carries across and what does not

Credit balances are the most contested money in any supplier failure, and the protection is real but conditional. Ofgem's explanatory note on customer credit balances, published in March 2024, states the position in two parts: "Customer credit balances are protected when a supplier fails, but these costs can be recovered from all consumers."⁹ So your money is safe, but the cost of making it safe is spread across everyone's bills, a point developed in the costs section below.

The Energy Ombudsman's record on this is reassuring as far as it goes: "In the past, all Suppliers of Last Resort have committed to honouring the credit balances of customers who were owed money by the former supplier."² That is a track record rather than a guarantee, and the protection rests on Ofgem's rules and the commitments extracted in the bidding process rather than on an automatic statutory right.

Debts work differently. Ofgem's guidance states: "If the new supplier transfers customer debts from your old supplier, you will need to pay them for your debt instead."¹ Whether debts transfer depends on the deal struck in the bidding process. For comparison, the ordinary switching rules give a sense of the normal mechanics: if you owe money to your old supplier and have been in debt to them for less than 28 days, any money you owe should be added to your final bill⁶, and prepayment meter customers can switch while owing up to £500⁶. After a failure, the new supplier will set out what, if anything, transfers.

Prepayment meter customers have a specific protection worth knowing. If a supplier installs a prepayment meter without your permission or remotely switches your existing meter to prepayment mode, the supplier must give you £30 credit once they have done so¹⁰. Installing a prepayment meter without permission should always be a last resort¹⁰. Money already loaded onto a prepayment meter is a credit balance like any other, and falls under the same protection described above.

The price of the process and who ultimately foots the bill

The Supplier of Last Resort process is not free, and the bill lands on energy consumers collectively. Ofgem's explanatory note on customer credit balances states the mechanism directly: credit balances are protected when a supplier fails, "but these costs can be recovered from all consumers."⁹ The protection of individual households is funded by a levy mechanism spread across bills, which is why the surge in supplier failures in 2021 and 2022, when SoLR costs surged before tailing off⁴, left a lasting mark on standing charges.

The Welsh Government's response to Ofgem's call for input on standing charges makes the same connection, noting that Supplier of Last Resort costs surged in 2021 and 2022 before tailing off⁴. The failures of that period, dozens of suppliers with over a million customers between them, were absorbed through this process, and the recovery of those costs is one of the components households pay in their standing charge today.

There is a parallel in how other levy-funded schemes work. The Feed-in Tariffs scheme operates a levelisation process, described in Ofgem's guidance for licensed electricity suppliers as "the mechanism by which the cost of the FIT scheme is apportioned across Licensed Electricity Suppliers"¹³. The costs are then passed through to bills. The same principle of socialising costs across all consumers underpins the recovery of SoLR costs.

For a household weighing its energy position, this is the key trade-off to understand. The SoLR process protects you individually if your supplier fails, but it does so by distributing the cost across every bill in the country. The more suppliers that fail, the more everyone pays, which is one of the arguments behind Ofgem's tighter financial resilience rules for suppliers, designed to reduce the number of failures in the first place.

First steps to take: submit meter readings and safeguard yourself

The single most useful action on the day a supplier fails is to take a meter reading. Keep a record of it to make sure you are billed correctly by the new supplier."¹ The reading is your evidence of exactly where your consumption stood at the moment of the transfer, and it protects you against being billed for energy used under the old supplier's account.

If you have a smart meter, the position is easier still. Energy suppliers must take all reasonable steps to ensure that smart meters automatically send them your gas and electricity meter readings¹⁴. The government's guide on smart meters sets out the standards energy suppliers should follow at each stage of the customer's smart meter journey¹⁵, and if you suspect an issue with your smart meter, or your supplier identifies one, they should promptly investigate it and keep you informed¹⁵.

The steps in order:

1. Take a meter reading on the day you hear the news, and keep a record of it¹.
2. Do not switch yet. Wait until the new supplier has been appointed and has contacted you, as the Energy Ombudsman advised Toto Energy customers in 2019⁵.
3. Do not cancel your direct debit until the new supplier confirms your account is set up and tells you what happens to payments.
4. Note down your credit balance from your most recent bill or online account, so you can check it against what the new supplier records.
5. Wait for contact from the new supplier, which Ofgem states could take up to 14 days¹.

Beyond the immediate steps, the support framework continues under the new supplier. Suppliers can agree a payment plan, payment break or reduction for households struggling to pay¹¹, and Ofgem's Consumer First Panel found that households expect their supplier will help them if they need support¹⁶. Those obligations transfer with the account.

Shortcomings of the scheme: exclusions, grievances and unresolved issues

The process has known gaps, and the most significant one concerns complaints. The Energy Ombudsman's review of Ofgem's call for evidence states the problem plainly: "when suppliers leave the market through this process, consumers with outstanding disputes lose out, because there is no obligation on the new supplier to fulfil the obligations" of the failed supplier¹⁷. The Supplier of Last Resort "does not have an obligation to take on complaints about the supplier in administration as it was not involved in" the events complained about².

The practical position is layered. Once a company ceases trading, the Energy Ombudsman cannot open any new cases for dispute with the closed company, though prior disputes are sometimes upheld by the new nominated supplier¹⁸. If your complaint is taken on, you need to follow the company's dispute process first to give them an opportunity to fix the issue, and your supplier should have a formal dispute process you can request a copy of¹⁹. If the complaint is unresolved after eight weeks, you can pursue dispute resolution through the Energy Ombudsman².

Complaints that do carry over cover the familiar ground: late, incorrect or missing bills, back billing, being overcharged, a faulty meter, poor customer service, and refusing to refund credit from your account²⁰. The Ombudsman's powers are real: "If a mistake has been made or you have been treated unfairly, we can require the supplier to put things right."¹⁹

The exclusions are structural. The SoLR process does not apply to heat networks or the Green Deal². Heat networks are natural monopolies: one entity is the supplier for all homes and businesses on the network, which means consumers cannot switch suppliers or move to a different tariff unlike gas and electricity consumers²¹. From 1 April 2025, all heat network suppliers are bound by the scheme rules and are required to be members of the scheme¹⁸, which provides a route for complaints, but not the SoLR safety net. If your home is on a communal heating system, see our page on heat network suppliers.

There is also a wider service-quality context. Ofgem's market compliance review of customer service and complaints handling, completed in February 2023, identified long call wait times, high call drop rates, slow written responses, weaknesses in complaint processes, incomplete management information, weaknesses in agent training and quality control, and high rates of complaints upheld by the Ombudsman²². A transfer to a new supplier with weak complaint handling compounds the difficulty of resolving anything left over from the old one.

Leaving the supplier you were assigned, including mid-transfer switches

Once the new supplier has been appointed and has contacted you, you are free to leave. Ofgem's guidance states that you can switch to another supplier if you want to without any exit fees¹. The appointed supplier cannot hold you to a fixed term you never agreed with them, and the transfer does not create a new lock-in.

The timing matters. The advice given to customers of failed suppliers in the past has been not to switch until the new supplier has been appointed and has contacted you⁵. Switching during the transfer window risks an erroneous transfer or a dispute about which supplier was responsible for which period, and the 14-day appointment window is short enough that waiting costs little.

If you were already mid-switch when your supplier failed, the position is settled: "If you were already in the process of switching, you will still move to the supplier you chose."¹ A supplier failure does not cancel a switch that is already in progress, so there is no need to start again or worry that the process will be derailed.

When you do switch on, the ordinary rules of switching apply. Your old supplier, in this case the appointed one, will refund any credit in your final bill, and you could get compensation if they do not⁸. If you owe money to the appointed supplier and have been in debt for less than 28 days, any money you owe should be added to your final bill⁶. And if you were on a fixed rate tariff with them and chose to leave before it ended, you may have to pay an exit fee⁶, though the fee position for tariffs inherited through the SoLR process is set by the terms the new supplier gave you at transfer.

For households thinking about longer-term energy independence, the SoLR experience is often the moment the dependence of retail supply becomes visible. Your supply, your credit and your tariff all rest on the solvency of a company you did not choose, and the remedy when it fails is another company chosen for you. The protections are genuine, but they are protections within the market, not independence from it. For the wider picture of how supplier relationships fit into household self-sufficiency, see energy suppliers and household energy independence, and for the full history of which companies have failed and when, see energy supplier failures.