Supplier of Last Resort UK: What Happens When Your Business Energy Supplier Fails

Between 2021 and 2023, more than 30 UK energy suppliers exited the market. Most were small challengers caught between fixed retail prices and a wholesale market that doubled, then trebled. Each time a supplier failed, Ofgem ran its Supplier of Last Resort process. Each time, business customers were moved to a new supplier within a fortnight, often onto a deemed contract that cost significantly more than the deal they had lost.

This guide explains what the SoLR process is, what Ofgem does behind the scenes, and what changes for your business the moment your supplier goes under.

What is the Supplier of Last Resort process?

The Supplier of Last Resort, abbreviated SoLR, is the safety-net mechanism Ofgem uses when a licensed energy supplier loses its licence or ceases to trade. The regulator runs a competitive process inviting other suppliers to take on the failed supplier's customer book, and appoints whichever bidder offers the best combination of price, terms, and operational readiness.

The legal basis sits in the Electricity Act 1989 and the Gas Act 1986, under which Ofgem can direct a licensed supplier to take on customers from a failed competitor. The detail of how the process runs is set out in Ofgem's published guidance and in supplier licence conditions.

The SoLR process is distinct from the Special Administration Regime, which only applies to very large suppliers where transferring the book to a single competitor is impractical. SoLR has handled every UK business and domestic supplier failure since 2018.

What happens to your supply when your supplier fails

The first thing to understand is that your gas and electricity do not stop flowing. The physical supply is independent of the company that bills you for it. Distribution network operators run the wires and pipes. Suppliers are commercial intermediaries who buy energy on the wholesale market and resell it to end users.

When a supplier fails, Ofgem typically follows this sequence:

• Day zero: Ofgem revokes the failed supplier's licence or accepts its surrender.
• Day zero to day three: Ofgem invites bids from other licensed suppliers willing to take on the customer book.
• Day three to day seven: Ofgem evaluates bids and appoints the SoLR by formal direction.
• Day seven onward: Customers are transferred. The new supplier writes to each customer with new account details, new tariff information, and instructions on what happens next.

During this entire window, the lights stay on. Smart meter readings continue to be collected. Direct debits may pause briefly while account details are reassigned, but the physical supply is never interrupted.

Deemed contracts: what they are and why they cost more

When you are transferred to the SoLR, you are placed on a deemed contract. A deemed contract is a default arrangement that exists by operation of law: there is no signed agreement, but you are using energy supplied by the new company, so a contract is deemed to exist on whatever terms that supplier publishes for unsolicited customers.

Deemed contracts are usually expensive. The SoLR is taking on customers it did not choose, often inheriting unhedged demand against wholesale prices that have moved since the failed supplier last bought energy. Ofgem allows the SoLR to recover its reasonable costs through a Last Resort Supply Payment, funded through industry levies that ultimately flow back to all bill payers. The unit rates on a deemed contract reflect this risk pricing.

For a small business, the difference between a fixed contract signed twelve months earlier and the deemed contract from a SoLR can be 40 to 80 percent on unit rates. Standing charges often rise too. This is the single biggest financial shock when your supplier fails.

What happens to your credit balance

If your business was in credit with the failed supplier, that credit is protected under the SoLR process. Ofgem requires the appointed SoLR to honour customer credit balances as a condition of the appointment, and the regulator covers the cost through the Last Resort Supply Payment if the failed supplier's estate cannot fund it.

In practice, the new supplier will:

• Acknowledge your previous balance once your account is migrated.
• Apply the credit to future bills, or refund it on request, depending on the supplier's policy.
• Request supporting evidence such as a recent bill if the data transfer is incomplete.

If your business was in debit, the debt typically transfers with you. The SoLR takes on the receivable as part of the customer book. You remain liable for energy you have already used.

Fixed contracts: do they survive the failure?

Almost never. A fixed-price contract is an agreement between you and the failed supplier. When the supplier loses its licence, those contractual obligations effectively cease for the new supplier, which has no commercial reason to inherit loss-making tariffs.

The SoLR is not required to honour the original fixed price. In every supplier failure since 2021 covered by Ofgem decision notices, the SoLR placed transferred customers onto deemed contracts at the SoLR's own published rates, not the failed supplier's contracted rates.

This is the most common surprise for business customers. They assumed the protection extended to the price they had locked in. It does not. The protection covers continuity of supply and credit balance, not commercial pricing.

Your right to switch after a SoLR transfer

You are not stuck. Once the SoLR has confirmed your account, usually within four to six weeks of the transfer, you can switch to any supplier on any tariff with no exit fee. The deemed contract does not carry termination charges, because you never signed anything.

The practical sequence is:

• Wait for the welcome letter from the SoLR confirming your account number and meter details.
• Take a meter reading on the day of transfer if possible, to anchor the opening balance.
• Compare quotes from other suppliers using your new account number.
• Sign a new contract. The new supplier handles the switch directly with the SoLR.

Brokers will often contact you within days of a SoLR appointment because the customer book is, by definition, on expensive deemed rates and is a soft target. Treat unsolicited approaches with caution. Run your own comparison using direct quotes before committing to anything routed through a broker.

How to verify a supplier's financial health before signing

Once your business has been through a SoLR transfer, the next contract becomes a risk decision, not just a price decision. Ofgem publishes financial resilience information about licensed suppliers, and Companies House holds the full statutory accounts of every licensed supplier registered in the UK.

Before signing a fixed contract longer than 12 months with a smaller supplier, it is worth checking:

• Latest filed accounts at Companies House, focusing on net assets and the going-concern statement in the auditor's report.
• Ofgem's published list of any open compliance cases or financial directions against the supplier.
• Any recent news of capital raises, refinancing difficulty, or wholesale hedging losses.

None of this guarantees a supplier will not fail. The 2021 to 2023 wave of failures included companies that had previously appeared financially sound. But the diligence reduces obvious risk.

What changes for half-hourly metered businesses

Larger businesses with half-hourly settled supplies face a more complex transition. Half-hourly contracts are negotiated bilaterally, often with bespoke pricing structures that reflect demand profile, voltage level, and consumption pattern. When a supplier fails, the SoLR for half-hourly customers is typically a different appointee than the one chosen for the smaller domestic and non-domestic book, because the operational requirements are different.

For half-hourly customers, the transition usually involves:

• A bespoke deemed contract reflecting the customer's known consumption profile.
• Continuation of existing data collection and data aggregation arrangements where possible.
• A negotiated exit window, often longer than the four-to-six-week standard for smaller customers, because of the complexity of moving large half-hourly accounts.

If your business has a half-hourly supply and your supplier fails, your account manager at the SoLR should be your first point of contact. The standard customer service routes designed for small and microbusiness customers are not built for half-hourly volumes.

Frequently asked questions

Editorial disclaimer: This guide explains the published Ofgem Supplier of Last Resort process and is not a substitute for direct advice from your supplier or from Ofgem. Tariff information, deemed contract rates, and process timelines may change. Verify current rules against ofgem.gov.uk before acting.

Will my business lose power if my supplier fails?

No. The physical supply continues without interruption. Only the company that bills you changes. Distribution network operators, who run the wires and pipes, are not affected by a supplier failure.

How long does the SoLR appointment take?

Ofgem typically appoints a SoLR within seven days of revoking or accepting surrender of the failed supplier's licence. The customer transfer itself is usually complete within four to six weeks.

Will I keep my fixed tariff after a SoLR transfer?

No. The SoLR is not required to honour the failed supplier's fixed contract. You will be placed on a deemed contract at the SoLR's published rates, which is usually higher than the contract you lost.

Can I switch away from the SoLR immediately?

You can switch as soon as the SoLR has confirmed your account, usually four to six weeks after the transfer. There are no exit fees on a deemed contract.

Is my credit balance safe?

Yes. Ofgem requires the SoLR to honour customer credit balances as a condition of appointment, and covers the cost through industry levies if necessary.

How we verified this

This guide draws on Ofgem's published Supplier of Last Resort guidance, regulatory decision notices issued for individual supplier failures between 2021 and 2024, and the relevant supplier licence conditions. Process timings reflect the typical sequence documented in published Ofgem decisions.

Sources

• Ofgem: Supplier failures and the Supplier of Last Resort process
• Ofgem: Last Resort Supply Payment claims
• Electricity Act 1989, legislation.gov.uk
• Gas Act 1986, legislation.gov.uk
• Ofgem: Standard Licence Conditions for electricity and gas supply

For more on choosing a supplier and benchmarking quotes, see the UK business energy suppliers list and our guide to business energy comparison.