Recommendation 14

The government has an obligation to ensure continuity of energy supply to customers in the event of an energy supplier failure. We asked Ofgem what it had learned from recent supplier failures and whether it had reviewed the mechanisms in place for protecting energy customers. Ofgem told us that it kept the default process, the SoLR, under regular review and that the primary issue it saw with the process was the delay in transferring customers from the failed supplier to the new supplier. It explained that issues such as the resolution of any billing of financial issues, or the resolution of service concerned, became more difficult during this transition period, so it planned to establish clearer milestones up front with companies to make sure that happened more smoothly.25 We similarly asked whether the SAR process led to a lower cost for consumers overall than the SoLR process and, if so, did this mean that it needed to review and improve the SoLR process. HM Treasury told us that the easiest way to ensure continuity of supply to customers was via a SoLR rather than the SAR. The Department told us that while the SAR looked attractive, superficially, it actually left the state and the taxpayer financially exposed during the administration process. It explained that the SoLR process was more efficient and quicker where, at its best, there can be competition so that the loss to the consumer is minimised as much as possible, because there is value in customer books.26 Managing financial risks during the SAR - Hedging