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Ofgem has consented to allow nine energy retailers to claim back more than £1.8 billion in costs associated with becoming a Supplier of Last Resort (SoLR).
The regulator wrote to suppliers in October outlining plans to temporarily facilitate faster Last Resort Supply Payment (LRSP) claims to relieve pressure on the finances of companies taking on the customers of failed rivals whilst facing high wholesale energy prices.
The industry levy allows companies to claim back unrecoverable costs incurred by becoming a SoLR, including costs for buying additional energy for acquired customers. The payments are made by distribution networks and recouped through their charges.
At more than £680 million in total, Octopus Energy’s claims for costs incurred when it took on the 580,000 customers of Avro Energy are the largest by far. To date, Avro is the biggest company to have exited the market via the SoLR process.
British Gas, which has become the SoLR for the customers of seven failed suppliers since September, has claimed more than £361 million in total.
Shell Energy has also had a similar amount approved after it took on the customers of Green, Pure Planet, Colorado Energy, Daligas and Goto Energy.
| Supplier of Last Resort | Failed suppliers | Electricity | Gas | Total |
| British Gas | Bluegreen Energy, Zebra Power, PFP, MoneyPlus Energy, People’s Energy, Social Energy, Neon Reef | £198.5m | £162.6m | £361.1m |
| Eon Energy Solutions | Igloo Energy, Symbio Energy, Enstroga | £32.7m | £26.7m | £59.4m |
| Eon Next | Igloo Energy, Symbio Energy, Enstroga | £85.5m | £69.9m | £155.4m |
| EDF Energy | Zog Energy, Utility Point | £92.5m | £75.7m | £168.3m |
| Octopus Energy | Avro Energy | £374.8m | £306.6m | £681.4m |
| Scottish Power | Entice Energy, Orbit Energy | £24m | £19.7m | £43.7m |
| Shell Energy | Green, Pure Planet, Colorado Energy, Daligas, Goto Energy | £198.9m | £162.8m | £361.7m |
| Utilita | Omni Energy | £1.4m | £1.2m | £2.6m |
| Yu Energy | Ampower | £78,340 | £64,096 | £142,437 |
| All suppliers | £1,008.5m | £825.2m | £1,833.7m |
Industry sources have told Utility Week the regulator is looking at ways to mitigate the impact of the above costs when they feed through in April, although there are no concrete proposals as of yet.
In a statement on the SoLR levy claims, an Ofgem spokesperson said: “Ofgem’s safety net has protected more than four million customers through the unprecedented global gas prices this year, making sure they have an energy supplier and household credit balances are honoured.
“This comes at a cost, which we always seek to minimise. As we announced last week, we’re also stabilising the retail market with robust stress tests for all suppliers.”
The decisions published by Ofgem follow recent analysis by NERA Economic Consulting which suggested the bill for supplier failures in 2021, also including Renewables Obligation shortfalls, could be between £1.7 and £2.1 billion.
Already the price cap is at a record level of £1,277 and industry experts predict it could exceed £2,000 when it is updated in February.
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