What to do if your energy supplier goes bust
Although unusual, it can be distressing if your energy supplier goes bust. 15 energy firms have stopped trading in 2020, and with the government's furlough scheme due to end next month, even more smaller supplier could find themsleves under real financial strain and unable to continued trading.
If you’ve been affected, Ofgem, the energy regulator, will choose a new supplier to take on your contract, and has issued the following advice:
- Don’t switch supplier.
- Do sit tight, take a meter reading and wait until your new supplier contacts you.
But what does actually happen if the plug is suddenly pulled on your energy provider? Will your energy supply be cut off? And are you allowed to make the switch to a new provider?
Here we answer those questions, and more, so you know exactly what to do if your energy supplier goes bust…
What if my energy supplier goes bust?
It’s not often that an energy supplier will go bust, but it can happen - this video shows what you need to do if your supplier suddenly stops trading
Will my energy supplier go out of business?
It’s unlikely that your gas and electricity supplier will go bust, but Ofgem has provisions in place to make sure your energy supply isn’t cut off, should the worst ever happen.
Here’s how the energy regulator’s ‘safety net’ will ensure you’re not left in the dark if your energy provider goes out of business.
Will my gas and electricity be cut off?
No. Ofgem’s ‘safety net’ means you’ll automatically be moved to a new supplier, with no disruption to your service, and no need for you to do anything.
The only thing Ofgem suggests is that you take a meter reading when you find out your supplier has gone under, and then wait for your new supplier to get in touch with you.
Will I have to find a new supplier?
No. Ofgem will choose a new supplier. If an energy provider goes bust, Ofgem will put its contracts out to tender, and rival companies then bid for the business by offering the best deal.
Once a new supplier has been appointed, you will be moved on to a new contract and contacted within a few days.
Will my energy tariff change if my supplier goes bust?
Yes. Your old tariff will end and your new supplier will put you on to a ‘deemed’ contract – a specially arranged tariff that you haven’t chosen – which you can keep for as long as you need.
Will a ‘deemed’ contract make my energy bills more expensive?
Although Ofgem will negotiate with suppliers to get you the best possible deal, there is a chance your energy bills could increase. This could be because the new supplier charges higher prices to cover the cost of taking on more customers, especially as they’ll be taking them on without running the usual background credit checks. Any hike in prices would be made to reflect the higher risk involved.
Will I be able to switch supplier if my energy company goes bust?
Yes, but Ofgem advises you wait until you’re new supplier gets in touch regarding your deemed contract. When you are contacted, you should ask to be put on the cheapest deal, or shop around for a better deal. You won’t be charged any penalty fees (also known as exit fees) if and when you make the switch.
If you were already in the process of switching when your supplier went bust, you’ll still be moved to the new supplier.
Will I need to cancel my direct debit?
No, you won’t need to cancel your direct debit. No more money will be taken from your account so long as you didn’t owe any money to your previous supplier.
If you’ve already cancelled your direct debit, your new supplier will be in touch about setting up a new account.
If you were in-credit with your old provider, Ofgem will look to appoint a new supplier that will pay back any money owed to you, possibly in the form of credit on your new account.
Similarly, if you are in debt, this may be taken on by your new provider, or you may have to continue to pay it back to your old supplier through the administrator.
What if I’m on a prepayment meter?
Prepayment meter users are fully covered by the Ofgem safety net. If you’ve got credit on your key, card or token, you’ll be able to use it on your new account. If you need more credit, contact your new supplier to find out what you need to do, and if you’ll need any additional equipment.
How will I be contacted moving home?
Your new supplier, your old supplier, or its appointed administrator, will all contact you at your old home address, so you should make sure your mail is redirected.
Is it safe to go with a smaller supplier?
Energy isn’t all about the ‘Big Six’ anymore – although the major providers still supplying 91% of UK homes with gas and electricity, the growing number of smaller, ‘independent’ energy companies mean there’s more choice than ever before.
To put that into some context, if you’d been looking to switch energy in 2006, you’d have had about ten suppliers to choose from, just over ten years later and there are 40 companies who could power your home.
And that much choice can only be a good thing for you as a consumer and us as a comparison service – more energy companies means more competitive prices and more innovative tariffs – but there will inevitably be a nagging doubt that a smaller supplier could go bust, a concern that will push many back into the arms of one of the Big Six.
But don't let the news that Iresa has gone bust put you off, the writing has been on the wall for that company since March, when Ofgem ordered it to stop taking on new customers and threatened to revoke its licence.
These extreme measures were taken largely as a result of Iresa's appalling customer service, which saw customers, some of who were owed hundreds of pounds in refunds, forced to wait for hours on hold to reach customer service.
In the main, smaller suppliers often offer cheaper prices than the Big Six, with some also offering better levels of customer service - a bit of research and a price comparison is the key to finding the right deal with the right supplier.
How to switch energy supplier
How to switch energy supplier with UKPower. Simply enter your postcode and we'll compare energy prices from a range of suppliers. You then choose the one you prefer and we'll take care of the rest.
Have you been affected by Iresa going bust? Or were you were a GB Energy customer when it collapsed in 2016 – how was the switch to Co-operative Energy handled? Share your experience with and any advice you might have on Twitter.
Click here to run an energy price comparison, and see if you could be paying less for your gas and electricity.