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Supplier of Last Resort

What is a Supplier of Last Resort (SoLR)?

Imagine waking up to a letter saying your energy supplier has just gone out of business. It happened to roughly 4.3 million UK customers between autumn 2021 and summer 2022. The first reaction is usually panic. Will the lights go out? Will I lose my credit balance? Who do I pay next month? The answer to all three sits in a single piece of UK industry plumbing. A Supplier of Last Resort, almost always called a SoLR. The SoLR is the supplier Ofgem appoints, often within 24 hours of a supplier failing, to take over the entire customer book and keep everything running while the failed supplier is wound up.

SoLR can be triggered on either a business electricity or business gas contract, and it’s worth knowing because it can land mid-term and quietly reset your business energy rates.

SoLR is the safety net under the UK retail energy market. It keeps a supplier failure from becoming a customer crisis. The mechanism is run by Ofgem, baked into every supply licence, and ultimately paid for by every UK customer through the SoLR Levy that follows a failure. Knowing how it works matters when the letter arrives, because there are a handful of small actions in the first week that save real money.

What a SoLR does

The SoLR’s job is to absorb the customer book of a failed supplier and keep the supply going.

• All affected customers are transferred to the SoLR on a defined date.
• Existing meters keep working. No engineer visit. No physical change at the property.
• The MPAN (electricity) and MPRN (gas) identifying the supply stay the same.
• Credit balances on the failed supplier’s books are protected and refunded by the SoLR over the following months.
• Debt owed to the failed supplier is collected through the insolvency process, not transferred to the SoLR.

The transfer happens fast. Customers usually receive a welcome letter from the new supplier within 7 to 21 days of the original supplier ceasing to trade.

How a SoLR appointment is triggered

Ofgem appoints a SoLR when a UK licensed supplier ceases trading. The trigger is normally one of the following.

• Voluntary administration. The supplier files for insolvency.
• Licence revocation. Ofgem revokes the supply licence following compliance failures.
• Forced cessation. The supplier runs out of cash and cannot honour wholesale or network bills.

Ofgem invites bids from other licensed suppliers. The bid considers customer numbers, supply mix (domestic, micro-business, larger non-domestic), the size of the credit balance liability that needs refunding, and the rates the bidder proposes to apply during the holding period. Ofgem picks the SoLR that best protects customers at the lowest overall cost. The process can run in hours when there is enough lead time, or against the clock when a supplier collapses suddenly.

The SoLR process step by step

1. The failing supplier informs Ofgem, or Ofgem revokes the licence.
2. Ofgem invites bids from licensed suppliers within hours.
3. Ofgem appoints a SoLR, usually within 24 to 48 hours.
4. The SoLR takes on responsibility for the customer base from a defined transfer date.
5. Welcome letters are sent to customers explaining the change, the new account number, the holding tariff, and how credit balances will be handled.
6. Customers can stay with the SoLR (no action needed) or switch to a supplier of choice during a window without exit fees.
7. Credit balances on the failed supplier’s books are refunded by the SoLR over the following 4 to 12 weeks, recovered through the SoLR Levy.
8. The failed supplier’s administrator continues to wind up the original company in the background.

What happens to you as a customer

The day-to-day impact on a UK business customer is small in operational terms.

• Your supply continues without interruption.
• You move onto a holding tariff with the new supplier on the transfer date.
• Direct debits are reset to the new supplier’s collection arrangements.
• Any credit balance owed by the failed supplier is reclaimed by the SoLR and refunded to you.
• You have the right to switch supplier with no exit fees during a defined window (typically a few weeks).

The pain points tend to be administrative. Bills can be delayed during the transfer. Online portals are unavailable for a period. Direct debit amounts can change once the new supplier has accurate consumption data. None of these are exit-triggering on their own, but they do require attention in the first month.

Rates you pay under a SoLR

The SoLR places you on a holding tariff designed to bridge from the failed supplier to your eventual decision.

• Holding tariff rates are typically higher than fixed-contract rates available in the open market.
• Standing charges and unit rates are set by the SoLR within Ofgem’s framework.
• Holding tariffs are often close to (or the same as) the SoLR’s published deemed or out-of-contract rates.
• For domestic customers the price cap protects against extreme increases. UK business customers have no equivalent cap.

For business customers, the practical implication is that the SoLR holding period is expensive if left to drift. Comparing the market and switching as soon as possible avoids unnecessary cost. The SoLR’s commercial incentive is to keep the customer; the customer’s incentive is usually to test the market first.

How your credit balance is protected

UK domestic and micro-business credit balances are protected under Ofgem licence conditions. The protection works like this.

1. The failed supplier’s records show how much each customer was in credit at the date of failure.
2. The SoLR takes over the customer relationship including the obligation to make the customer whole on that credit balance.
3. The SoLR pays out the credit balances within 4 to 12 weeks of the transfer, normally as a refund to the customer’s bank account or as a credit against the new account.
4. The SoLR recovers the cost from the SoLR Levy, which Ofgem allows it to apply across the wider supplier base.

Larger non-domestic customers do not have the same automatic protection. They become unsecured creditors of the failed supplier and join the insolvency queue. In practice, very few large customers get their credit balances back in full when a supplier fails, which is one reason payment terms matter so much for big energy users.

The SoLR Levy on UK bills

The cost of a SoLR appointment is significant. Credit balance refunds, wholesale costs above the failed supplier’s contracted prices, and administrative costs are recovered through the SoLR Levy, which Ofgem allows the appointed SoLR to charge across the entire UK supplier base.

• The Levy is socialised across all UK customers, not just those of the failed supplier.
• It is shown as a discrete line on some bills, bundled into the unit rate on others.
• The total cost of the 2021 to 2022 wave was estimated at over £3 billion, recovered over several years.
• Domestic Levy costs feed through Ofgem’s default tariff cap calculation, so they show up indirectly in the price cap rather than as a separate line.

The Levy is the reason every UK customer ultimately pays the cost of any supplier failure, even those who were never customers of the failed supplier.

The 2021 to 2022 wave

Between autumn 2021 and summer 2022, the UK saw more than 30 energy supplier failures triggered by the wholesale gas price spike. SoLR appointments were used at scale for the first time.

• Around 4.3 million customers were transferred to SoLRs during the wave.
• The largest single SoLR transfer involved Bulb Energy, which entered Special Administration before a SoLR could be appointed (a separate insolvency mechanism for very large suppliers).
• Most affected customers experienced uninterrupted supply, though some saw delayed bills and tariff increases.
• The wave triggered Ofgem reforms to supplier financial resilience requirements, designed to reduce the likelihood of future failures.

Reforms after the 2021 wave

The supplier failure wave exposed weaknesses in how UK suppliers managed wholesale risk and customer credit balances. Ofgem responded with several reforms.

• Stronger financial resilience requirements. Suppliers must hold more capital and demonstrate adequate hedging against wholesale price moves.
• Ringfencing of domestic credit balances. A proposal to require suppliers to protect customer credit balances directly, rather than relying on the SoLR mechanism to refund them after failure.
• Tighter licence conditions. New tests for prospective supply licence holders, designed to prevent under-capitalised entrants from joining the market.
• Annual financial stress tests. Suppliers must show they can withstand defined wholesale price shocks.

The intent is to reduce both the likelihood of failure and the cost of it when it happens. The Levy will still exist as the backstop, but the design should mean smaller failures and lower socialised costs.

What to do if your supplier fails

If you receive a letter saying your supplier has ceased trading.

1. Take meter readings on the day you are notified. Photograph them with the date.
2. Do not cancel your direct debit. Wait for the new supplier’s instructions.
3. Keep statements from your old supplier showing your credit or debit balance at the transfer date.
4. When the welcome letter arrives from the SoLR, register on the new portal and submit your reads.
5. Compare the SoLR holding tariff against the wider market. Switching usually saves money.
6. If a credit balance from the old supplier is not refunded within 12 weeks, raise a query with the SoLR. Escalate to the Energy Ombudsman if unresolved (micro-business customers only).
7. For larger non-domestic accounts, register as a creditor in the insolvency process to claim the credit balance through that route.

Related entries. Change of Tenancy, final bill, deemed rates, out-of-contract rate, Energy Ombudsman, bill validation.

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