Recommendation 12

Between 2018 and 2021, the Department, HM treasury and Ofgem tested various scenarios for the failure of a large energy supplier to identify how a SAR might work in practice. We therefore asked what lessons they had learned from this experience.18 The Department told us that it reviewed annually its plans in the event of a SAR, and that questions surrounding resourcing and preparedness were part of these reviews.19 The Department explained that the last rehearsal took place in the summer of 2021, and was undertaken jointly with HM Treasury and Ofgem, and that this covered the point of supplier failure, the decisions around what to do, and all the approvals and funding arrangements that would need to be put in place to enable a SAR to actually be initiated successfully.20 The NAO found, however, that this scenario testing and the subsequent guidance and templates focused on starting a SAR and the immediate steps needed to appoint a special administrator. They did not extend to some of the later stages of running a SAR, such as the energy purchasing strategy or how to structure and run the sale process.21 HM Treasury told us that while there was a lot of positive work undertaken to prepare for the SAR, “a plan never matches with the reality”. It explained that there were a few things that were different to what it had expected or planned for, including the large number of small supplier failures in the summer before Bulb collapsed, which affected the capacity of the market to absorb the customers coming through the SoLR process. It also told us that there were particular problems around hedging and residual assets which it had not foreseen.22