Decisions on Last Resort Supply Payment Claims 2023
Decision
- Publication date
- Industry sector
- Supply and Retail Market
Following the appointment of a Supplier of Last Resort (SoLR), Ofgem manages an industry process which enables the supplier to seek to recover additional costs they face in supplying the transferred customers. This is known as a Last Resort Supply Payment (LRSP). Doing so ensures suppliers continue to come forward to act as SoLRs, and it is through this mechanism that customer credit balances are protected when a supplier fails. LRSPs are paid for by the relevant gas and electricity network operators, who then recover the cost through charges to suppliers.
We expect the SoLR to demonstrate the steps it has taken to minimise these costs, for example by seeking to claim credit balances from the administrator of the failed supplier. Ofgem decides on a case-by-case basis whether it is in consumers’ interests to grant our consent to recover costs.
In December 2021 we made temporary changes to the process for LRSP claims. The temporary process allows SoLRs that had been appointed since 1 September 2021 to submit an initial claim for immediate costs incurred, and subsequent ‘true-up’ claims for additional costs. If our assessment finds that an overpayment has been made in a previous claim, the SoLR is required to repay the excess through the same industry processes.
Following our decisions in 2021 and 2022 on claims submitted by SoLRs, Ofgem received further claims from SoLRs on 7 September 2023. We published our minded-to positions on these claims for consultation on 20 October 2023.
Following our review of consultation responses, we have now published our final decisions on these claims. Our assessment was carried out against the relevant licence conditions and/or our criteria and methodology to determine that the costs are additional, directly incurred as part of the SoLR role, otherwise unrecoverable, and economic. The publications include our decision and consent documents, and necessary directions to industry parties to enable the payments to take effect.