Your supply does not stop. That is the first and most reassuring thing to know, and it is worth saying before anything else. What is less widely known is that the protections covering households do not all extend to businesses, and the gap is precisely the part that costs money: your credit balance.
The short version
- Your gas and electricity keep flowing. Nobody gets cut off.
- Ofgem appoints a new supplier to take on the failed supplier's customers.
- Business credit balances are not protected the way household ones are. This is the important bit.
- You land on a deemed contract, which is expensive, but you can leave without exit fees.
- Take a meter reading immediately and keep everything.
On this page
What actually happens
When a supplier fails, Ofgem runs a process to appoint a replacement, known as the supplier of last resort. Your supply is transferred to them automatically. You do not need to do anything to keep the lights on, and you should not start trying to switch in a panic while it is happening.
The sequence is predictable:
- The supplier ceases trading and Ofgem announces it.
- Ofgem appoints a new supplier, usually within days.
- Your account transfers and the new supplier contacts you.
- You are placed on a deemed contract with them, because no contract was agreed between you.
- You are free to move to a better contract, with them or anyone else, without exit fees.
The standard advice during step two is to sit tight and wait to be contacted. Switching mid-process complicates things, including any attempt to recover what you are owed.
The credit balance problem
This is where business customers and households genuinely differ, and it is not well known.
When a supplier fails, domestic customers' credit balances are protected: the cost of honouring them is recovered across the industry. Business credit balances are not covered by that safety net.
The reasoning is that a business is treated like any other creditor of an insolvent company, and can apply to the administrators in the same way it would for any other supplier that went under. In practice that means you join a queue, and businesses often recover little or nothing.
What this means practically: Ofgem does try to appoint a replacement supplier willing to honour some or all of the outstanding credit, and sometimes that happens. But it is an outcome to hope for rather than a protection to rely on. If you are sitting on a large credit balance with a supplier, that is money at risk in a way most businesses have never considered.
What you will be paying
You will be placed on a deemed contract with the new supplier, because you never agreed terms with them. Deemed rates are the most expensive way to buy energy and exist to cover a supplier taking on an unknown customer at short notice.
The useful part: a deemed contract carries no exit fee and no notice requirement. You can leave the moment you have something better agreed. Our post on deemed and out of contract rates explains how they work.
So the sensible sequence is to let the transfer complete, make sure your account and readings are correct, and then move to a proper contract fairly promptly rather than drifting on deemed rates for months because the situation felt out of your hands.
What to do, in order
- Take a meter reading today and photograph the meter with the date visible. This is the single most useful thing you can do, because it fixes the point where one supplier's responsibility ends.
- Do not cancel your direct debit immediately. Cancelling can complicate the transfer and any balance owed. Wait to be told what to do.
- Gather your paperwork. Statements, your contract, proof of any credit balance, account numbers.
- Wait for the new supplier to contact you and confirm your details and readings with them.
- If you are in credit, register as a creditor with the administrators. It may recover nothing, but it costs little to do.
- Then sort a proper contract, because deemed rates are not where you want to sit.
Reducing your exposure
You cannot predict which suppliers will fail, and pretending otherwise would be dishonest. What you can do is limit what is at stake.
- Do not build a large credit balance. If your direct debit is consistently well above your usage, ask for it to be adjusted or for the credit to be refunded. On a business account that credit is not protected, so there is no good reason to leave it sitting there.
- Keep your own records. Regular meter readings and saved statements make reconstructing an account far easier if a supplier's systems become hard to reach.
- Know your contract end date, so a failure does not coincide with you having no plan anyway.
- Do not let price be the only factor. The cheapest quote in a volatile market sometimes reflects a supplier taking risks. That is not a reason to avoid smaller suppliers, but it is a reason to think about the credit balance point above.
Supplier failed, or worried about one?
We will tell you where you stand, what your deemed rates are costing while you sit on them, and get you onto a proper contract once the transfer has settled. If you are in credit with a supplier you are uneasy about, that is worth a conversation now rather than later.