New safety net for energy customers if supplier goes bust

Households will continue to receive their energy supply

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Energy customers have a new safety net to protect their credit balances if their supplier goes out of business as a host of small companies enter the market.

Ofgem has been reviewing procedures to cope with a supplier going out of business as an influx of new start-ups join the market offering cheap gas and electricity deals.

The regulator already has plans in place to ensure households will continue to receive their energy supply if their supplier goes under, but there were previously no guarantees that customers would get their money back.

Customers who pay by direct debit typically build up credit during summer which might peak at just over £100 to cover the cost of using more energy during the winter.

As unsecured creditors, these customers are unlikely to get their money back if their supplier becomes insolvent.

Ofgem will now take into account who can best protect consumers' credit balances as part of the process for selecting a replacement supplier in the "unlikely event" a company goes bust.

It said that "where necessary" it would let the replacement supplier recoup the cost of reimbursing the credit balances through an industry levy spread across all customers, but stressed this would only have a "small impact" on bills.

Rachel Fletcher, Ofgem's senior partner for consumers and competition, said: "It's important that people are fully protected in the unlikely event a supplier goes out of business.

"Our safety net gives peace of mind so they can have complete confidence to shop around for the best deal."

Claire Osborne, energy spokeswoman for uSwitch, said: "With more and more energy suppliers entering the market, strong consumer protection measures must be in place.

"Our latest figures suggest that almost half of all energy customers are in credit to their energy provider, so it's only right that this cash is protected in the unlikely event that a supplier goes out of business.

"We welcome today's announcement from Ofgem, which will give customers even more confidence when shopping around for better deals."