Energy customers will be shielded from the cost of energy
supplier failures thanks to a new rule that will make failed
suppliers liable for the costs of transferring their customers to
new firms, Ofgem has confirmed today [Tuesday 5 August
2025].
The Supplier of Last Resort (SoLR) Levy Offset rule will ensure
the costs claimed by energy companies under the SoLR levy, for
taking on customers from firms that go out of business, will be
the liability of the failed supplier. This will be recovered
through the insolvency process where the failed supplier has
residual assets available to pay creditors.
Since the energy crisis, Ofgem has strengthened the rules so that
suppliers are more resilient to shocks and less likely to fail.
Suppliers must have capital to cover their risks and ring-fence
certain aspects of their finances including their renewable
obligations.
As a result, the market is becoming much more resilient, but like
any competitive market, some companies will still fail from time
to time. The new rule will ensure that, where funds remain
available, keeping costs low for customers will remain the top
priority.
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 introduction of the SoLR Levy Offset follows a series of
interventions by the regulator 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 action has resulted in suppliers moving from net negative
assets during the crisis to a positive £7.5 billion of adjusted
net assets. This value protects consumers by acting as buffer to
absorb losses that a company might experience, and means
companies are significantly less likely to fail and better placed
to focus on driving up standards for customers and investing in
innovative products.
The cost of supplier failure has also now reduced to zero, and
with this suite of measures the sector is in a much stronger
position to weather unexpected shocks like those seen during the
energy crisis, when gas prices rose to unprecedented
levels.
ENDS
Notes to editors
- You can read more on the decision here.
