Ofgem implements consumer credit safety net

Ofgem has taken action to protect consumers’ credit balances if their supplier goes out of business.

The regulator will now consider who can best protect consumers’ credit balances as part of the process for selecting a replacement supplier.

Ofgem launched a consultation on the measures in June and aims to ensure that customers have confidence when switching supplier.

The existing “supplier of last resort” regime already guarantees that customers continue to receive their energy supply if their provider becomes insolvent, but customers are unlikely to get any money back if their account is in credit.

Ofgem’s senior partner for consumers and competition Rachel Fletcher 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.”

Direct debit payments spread the bill cost evenly throughout the year and customers typically build up credit during the summer. Where necessary, Ofgem would allow the replacement supplier to recoup the cost of reimbursing the credit balances through an industry levy.

Ofgem claims that the levy, which would be spread across all energy customers, would “only have a small impact on bills”.