Supplier Licensing, Supplier Failure and Supplier of Last Resort

If your energy supplier goes out of business, your gas and electricity supply will not be cut off. Ofgem, the regulator, will automatically move you to a new supplier and place you on what is called a deemed contract for six months¹. You do not need to do anything to keep the lights on: the same wires and pipes deliver the energy, and only the company that bills you changes¹.

For household customers, any credit balance on your account is protected by the rules Ofgem sets, and the new supplier will contact you about a refund¹. A deemed contract cannot charge you exit fees and has no fixed term, so you are free to switch to any supplier at any time¹. The rates you are moved onto are set by the new supplier, but they remain covered by the energy price cap¹.

If your energy firm collapses, here is what to expect

When an energy supplier ceases trading because of financial problems, the first thing Ofgem does is appoint another supplier to provide energy to the failed company's customers, a process known as the Supplier of Last Resort². An administrator is then chosen to run the company of the supplier that has gone out of business, dealing with its debts and winding down or selling its operations¹. From the household's point of view, the practical effect is a change of billing company rather than a change of supply: the electricity and gas reaching your home continue through the same network infrastructure.

The transfer is not something a household has to arrange. Ofgem's guidance is that you do not need to do anything if your current supplier goes out of business, because the regulator will automatically move you to a new supplier and make sure your energy supply is not interrupted³. The new supplier will contact you to explain your new tariff and account arrangements.

What is worth doing in the days around a failure is mostly record-keeping:

1. Take meter readings for gas and electricity on the day you hear the news, so the new supplier's opening bill is based on figures you trust.
2. Save copies of your latest bills, statements and payment records while you still have online access to the account¹.
3. Note any open complaint or agreed compensation, with reference numbers.
4. Wait for the new supplier to contact you, then check the rates you have been placed on.

Automatic transfer: the default supply arrangement you inherit

A deemed contract is the arrangement that applies when a customer consumes energy without having agreed a contract with a supplier. In the context of supplier failure, it is the contract the new supplier places you on automatically. More generally, the Energy Ombudsman explains that a deemed contract is normally in place when a customer moves to new premises and starts to consume gas or electricity, or both, without agreeing a contract with a supplier⁵. The same principle appears in Ofgem's draft consumer protection guidance for heat networks, where a deemed contract applies when there is no supply contract in place, for example when a consumer has moved into a heat network property and consumes heating, hot water or cooling with no contract agreed⁶.

The key features of a deemed contract are set by rule rather than by negotiation:

• No fixed term. Ofgem's heat network guidance states that a deemed contract must not provide for any fixed term period⁶.
• No termination fee. The same guidance rules out any termination fee payable by the consumer⁶.
• Six-month duration after supplier failure. When a supplier fails, the deemed contract you are placed on runs for six months¹.
• Free copy on request. For heat network deemed contracts, a copy "must be provided to that person free of charge within a reasonable period of time after receiving the request"⁶.

It is a safety net rather than a product you chose, and the rules recognise that by keeping it short and keeping the exit open. For households on heat networks, the same guidance requires that the notice period for termination by a consumer be no longer than 30 working days⁶, a protection that matters because heat network supplies sit outside the price cap, as covered below.

Deemed rates are typically at or near the standard variable tariff

The rate you pay on a deemed contract is chosen by the supplier that takes you on, not by you. There is no obligation to put you on their cheapest available deal, and Ofgem's guidance is that you can ask your new supplier to put you on their cheapest tariff, or switch to another supplier instead, rather than stay on the deemed contract¹.

In practice, deemed contract rates resemble the supplier's standard variable tariff, the type of tariff where, as the Energy Ombudsman explains, "your rate fluctuates depending on the price of energy"⁷. An independent guide to reading an OVO bill illustrates what happens when a chosen deal ends: the customer is rolled onto the supplier's standard variable tariff, "which would probably cost them more"⁸. A deemed contract works in a similar way, except that you never chose the original deal in the first place.

The cost gap can be substantial. In a case reviewed by the Energy Ombudsman, the standing charge on a deemed contract was "nearly 14 times higher than the consumer could have achieved on contract"⁵. That figure is a single case rather than a market average, but it shows why sitting still on a deemed contract is rarely the cheapest option. The protection that matters is the price cap, which limits what a deemed contract can charge, and the freedom to switch away without penalty at any time.

Your deemed contract remains covered by the price cap

Even on a deemed contract, you remain covered by the energy price cap¹. The cap applies where a customer has not signed up for a fixed-term contract with their supplier⁹, which is exactly the position of someone moved onto a deemed contract after a supplier failure. Ofgem describes the tariffs covered by the cap as standard variable tariffs¹⁰, and its longer-standing guidance confirms that fixed-term energy tariffs chosen by the customer are not protected¹¹.

The scale of this protection is large. The default tariff cap was introduced on 1 January 2019 and protects 22 million default tariff and standard variable tariff customers¹². Without it, a supplier taking on customers through the Supplier of Last Resort process could set deemed rates at whatever the market would bear.

There are important exceptions. Business energy customers are not protected by the energy price cap¹³. Heat networks are also outside the cap: Edinburgh's local heat and energy efficiency strategy notes that heat network supplies "are not covered by the OFGEM energy price cap (or the UK Government's Energy Price Guarantee) as classed as commercial supplies"¹⁴. Households on heat networks that lose a supplier therefore face a weaker position than households on gas and electricity, which is one reason the heat network regulation framework is being strengthened. The cap's history also shows its limits: during the energy crisis, customers were protected from the October 2022 increase by the Energy Price Guarantee, which limited price increases to 26%, with the government paying suppliers the difference⁹.

Freedom to switch at any time with no exit penalties

A deemed contract cannot lock you in. Ofgem's heat network guidance states that a deemed contract "does not provide for any fixed term period or any termination fee to be payable by the Consumer"⁶, and Ofgem's supplier failure guidance is that you can switch to another supplier if you want to without any exit fees¹.

This matters because exit fees are real money on tariffs you choose yourself. An independent guide to a sample OVO bill shows exit fees of £50 per fuel, £100 in total for both electricity and gas, for a customer switching before the final 49 days of the contract⁸. The same guide notes that from 49 days before the plan end date, suppliers should not charge any exit fees⁸. Ofgem's general switching guidance confirms the position on chosen fixed deals: 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 ended³.

Switching itself is fast. Suppliers must switch your electricity or gas supply from your old supplier to your new supplier within 5 working days³. If you pay a supplier directly for the electricity or gas you use at home, you can choose to switch to a different supplier or tariff at any time³. The main restriction is debt:

• You cannot switch if you have been in debt to your supplier for more than 28 days³.
• If you owe money and have been in debt for less than 28 days, what you owe should be added to your final bill³.

How the six-month rule works and what follows it

A deemed contract placed after a supplier failure runs for six months, and Ofgem's rule is that after 6 months, the deemed contract must go back to its normal rate¹. In other words, the special deemed terms are time-limited: the supplier cannot keep a transferred customer on deemed terms indefinitely, and after the six-month mark the account reverts to the supplier's standard terms.

The six-month window is best treated as a period for making a decision rather than a waiting period. Because there is no fixed term and no exit fee, a household can compare the market at any point during those six months and switch within five working days³. Waiting until the six months expire means accepting whatever the supplier's normal rate turns out to be, when a chosen fixed deal might be cheaper.

Two related protections are worth knowing. Ofgem's back billing rules generally mean you cannot be billed for energy used more than 12 months ago, but there is an exception if you have acted unreasonably, for example by stopping your supplier from billing you accurately, including by blocking access to your meter¹⁵. Keeping the meter accessible and submitting readings protects that right. And for heat network customers, the termination notice period on a deemed contract cannot exceed 30 working days⁶, so even outside the price cap there is a route off the contract.

Money owed to you: credit balances and debts with a new supplier

For household customers, the protection is explicit: if your supplier goes out of business, your credit balance is still protected by the rules Ofgem sets, and the new supplier will contact you about a refund¹. Under an Energy Supply Administration Order, your credit balance will be protected unless you are a business¹. Business customers therefore carry a real risk of losing credit held with a failed supplier.

The same protection applies in ordinary switching. When you switch to a new supplier, your old supplier will refund any credit in your final bill, and you could get compensation if they do not¹⁶. If you owe money rather than being in credit, debts of less than 28 days are added to your final bill³.

Practical steps matter here. Once a supplier has stopped trading, you may not be able to access your account details online¹, so a recent statement, a record of payments and a meter reading taken at the time of the failure are the evidence that supports a refund claim. If paying the bills is the problem rather than the supplier's failure, suppliers can agree a payment plan, payment break or reduction¹⁷, review your current payments and debt repayments, and give access to hardship funds¹⁸. All fuel suppliers, electricity and gas, follow a code of practice that means they will not cut off your supply if you agree a payment plan with them and then keep to it¹⁹.

Who regulates the market: Ofgem and the Gas and Electricity Markets Authority

Ofgem is the UK's energy regulator, and the Gas and Electricity Markets Authority is the body behind it that makes decisions on licensing and price controls. When an energy supplier ceases trading, "to prevent a drop in service to customers Ofgem will appoint another supplier" to provide their energy supply². That appointment power is the mechanism the whole Supplier of Last Resort process rests on.

The price cap is the other half of the safety net. The Welsh Government explains the policy intent plainly:

The legal basis constrains how the cap works: under the Act, Ofgem cannot set different cap levels for different suppliers and must protect default tariff customers¹². That is why a deemed contract, which is a form of default supply, falls under the cap rather than being priced supplier by supplier.

Ofgem also polices the rules it sets. In its October to December 2025 price cap decision, the regulator stated: "Ofgem will be closely monitoring supplier compliance and will continue to take firm action against suppliers who fall short of their requirements"²¹. For a household on a deemed contract, that monitoring is the backstop behind the cap. More on how the cap level itself is set is on the energy price cap page, and the regulator's wider role is covered under Ofgem.

How to obtain your deemed contract and usage information

You are entitled to see the contract you have been placed on. Ofgem's guidance for heat network suppliers states that a copy of a deemed contract "must be provided to that person free of charge within a reasonable period of time after receiving the request"⁶. The same principle applies to gas and electricity deemed contracts: ask the new supplier, and the request should not cost you anything.

Your consumption history is also accessible. Consumers can check their online statement, which will display energy consumption for the last 12 months, unless they have been a customer for less than 12 months, together with an estimated cost of supply for the next 12 months²². This matters after a supplier failure because the old account may be unreachable: consumption data is what you need to compare tariffs accurately and to check that the new supplier's opening readings are right.

If something goes wrong, the complaints route is fixed. Contact your energy supplier for problems relating to late, incorrect or missing bills, back billing, being overcharged, a faulty meter, poor customer service, or refusing to refund credit from your account²³. The route in order:

1. Log a dispute with your supplier. Your supplier should have a formal dispute process that you can request a copy of, often found on their website²⁴.
2. Wait for a final decision or a deadlock letter.
3. If you receive either, or 8 weeks have passed and your complaint has not been resolved, register the dispute with the Energy Ombudsman²⁵.

The Energy Ombudsman is an independent service, separate to Ofgem, and can also review disputes with network operators if there is a loss of service or problem with a connection or repair²⁶. The full route is set out on energy complaints and redress.

One related risk is erroneous transfer, being moved to a supplier without your agreement. All energy suppliers must follow the Erroneous Transfer Customer Charter, and you could get compensation if this happens to you²⁷. In such complaints, the gaining supplier should provide evidence that a contract was agreed, which could include a copy of a call recording or a screenshot of the information submitted by the consumer.

Does a supplier collapse affect your household energy independence?

A supplier failure is one of the few energy crises a household does not have to solve itself. The supply continues, the transfer happens automatically, credit balances are protected for homes and the price cap still applies¹. The system is designed so that the failure of a billing company does not become the failure of a household's heating and lighting.

The dependence that remains is worth stating plainly. A household in this process is still dependent on Ofgem to appoint a replacement supplier, on the appointed supplier to set a fair deemed rate, and on the price cap to limit what that rate can be². The household does not choose the new supplier, does not choose the deemed tariff, and cannot control when the six-month period starts¹. Consumers with disputes in flight can lose out entirely, because the new supplier has no obligation to fulfil the failed supplier's obligations⁴. And for heat network customers and businesses, the price cap protection does not apply at all¹⁴.

The practical lesson is that the protections guarantee continuity, not value. The deemed contract is a bridge, and the rules keep the exit open: no fixed term, no exit fees, a five-working-day switch and the right to ask for the supplier's cheapest tariff¹. A household that takes meter readings, saves its account records while it still can, and compares tariffs during the six-month window keeps the one form of control the process leaves in its hands, the choice of what happens next. That sits within the wider picture of regulation and energy independence.