SoLR Levy Offset Policy Consultation
Consultation
- Upcoming
- Open
- Closed (awaiting decision)
- Closed (with decision)
Publication date
Closed date
Industry sector
Supply and Retail Market
When an energy supplier fails, Ofgem’s Supplier of Last Resort (SoLR) safety net makes sure that consumers’ gas and electricity supplies are not disrupted. Customers do not need to find a new supplier as Ofgem will switch their accounts to a new supplier without any interruption. It also ensures that that if domestic customers’ account balances are in credit, they will get back every pound they held to their credit with their old supplier. Ofgem manages an industry process which enables the SoLR to seek to recover additional costs they face in supplying the transferred customers. This is known as a Last Resort Supply Payment, which is recovered across all consumers.
Since the energy crisis, Ofgem has strengthened the rules to ensure that suppliers are more resilient to shocks and less likely to fail, as well as to reduce the size of mutualised costs in the event that they do exit the market. Suppliers are required to have capital and liquidity to cover their risks and take action to minimise the extent of costs to be mutualised, which makes them the first line of defence. We have also introduced the requirement for suppliers to ringfence their Renewables Obligation receipts, ensuring this cash is insolvency remote to reduce the cost of mutualisation in the event of failure.
We are now consulting on proposals that could further reduce the costs to consumers upon failure of a supplier, in the interests of consumers. These proposals would aim to recover some of those costs through the insolvency process where the failed supplier has residual value after paying out certain creditors.