What Is A Supplier Of Last Resort? (SoLR) | Dyball Associates

Philippa Pickford, Ofgem’s director for future retail markets, said: “Breeze Energy customers do not need to worry, as under our safety net we will make sure your energy supplies are secure and domestic customers’ credit balances are protected.

“Ofgem will now choose a new supplier for you and whilst we’re doing this our advice is to ‘sit tight’ and don’t switch. You can rely on your energy supply as normal. We will update you when we have chosen a new supplier, who will then get in touch about your new tariff.”

The energy supply market is a highly competitive one and as a result companies do and have failed. In 2019 alone, nine energy suppliers have gone under.

The preferred outcome of such a scenario is that the failed company will be able to do a trade sale of its customers, however, this is not always possible. When a trade sale fails Ofgem will step in and implement its SoLR powers to ensure a smooth transition of customers to a new supplier.

SoLR was first introduced back in 2003 in order to ensure that in the case of a supplier failing, affected customers are guaranteed continuity of supply . In recent years, the SoLR process has been implemented several times due to the number of energy suppliers having to exit the market.

Every instance where an energy supplier has exited the market is unique, but industry experts have identified a few possible reasons as to why businesses have failed.

New entrants into the energy market find themselves against the Big Five that have established themselves and have dominated the sector for years. These smaller companies are often less well-resourced and struggle to meet the cash flow challenges that can occur in the face of rising policy costs and wholesale energy price fluctuations . Energy prices are notoriously volatile and are often affected by events out of the supplier’s control. The smaller firms are less likely to be able to absorb sudden price shifts.

Customer service is another big factor when it comes to success and failure. Smaller firms can struggle to provide their customers with decent levels of service which in turn puts increased demand on the company. In extreme circumstances, Ofgem can even impose orders that restrict the company’s ability to take on new customers on companies struggling to provide a high enough standard of customer service.

In the event of an energy supplier exiting the market, Ofgem will take over the process and assign a gas or electricity supply licensee to take over responsibility for the failed business’ customers. This occurs once Ofgem revokes the failed supplier’s licence.

Although network operators and Elexon have information about a supplier’s meters, volumes used and site addresses, they do not hold customer billing details. Ofgem will ask the failing supplier for information about its portfolio and for details of its customers.

When it comes to choosing a SoLR the authority will assess to see which bidding licensee has the capacity to support the additional customers without jeopardising the supply to its current customers. It must also be able to fulfil its other supplier obligations. If no suitable supplier wants to be a SoLR, Ofgem can use its powers to appoint a supplier without its consent.

If you are assigned as the SoLR there are a few things you can do to make sure the process goes as smoothly as it can for consumers.

One thing is for certain; the customers of the failed supplier will be concerned and often confused as to what happens next. As the SoLR you should make communicating with your new consumers a priority and offer them reassurance.

Consumers can quickly become frustrated if there is a lack of communication and they have outstanding issues and complaints against the now defunct supplier that they will need assistance resolving. Often, the media will run headlines that are likely to create fear and apprehension.

Acquiring suppliers will need to win the trust of their new customers, which means keeping them informed about the process and updated with how its going. Regular communication via emails, blog posts, social media and letters should be prepared and sent. Having a communications plan in place prior to bidding for the SoLR can stand you in good stead. Ensure the messaging is clear, consistent, and correct to avoid confusion and potential complaints.

Some suppliers who win the bid for a SoLR can acquire a very active customer base which is a positive as they will engage with your communications plan. However, one downside to this is that it will put pressure on your ability to handle an influx of calls and messages. It is a good idea to set up a dedicated helpline or online app for affected customers.

Internal communication is also important. If some people within the business do not understand the process or are not informed, then mistakes can occur which could lead in frustration and anger from customers.

The issues a SoLR may encounter will unique for every case but there are a few common issues that are likely to arise.

Understandably the most common question you are likely to face will be around whether consumer credit is protected. To counter this inevitable question a supplier should quickly and clearly communicate this information. Instructions on how customers can claim back their credit, the contact details of those they should direct questions too and information on who will be paying the credit balance should all be included. Managing expectations with realistic timescales as to when credit will be returned will put consumers at ease and reassure them that their money is safe.

Some consumers may have been relying on their built-up credit for budgetary reasons and could be owed large sums. These consumers will rightly be concerned so you should do all that you can to put them at ease.

A SoLR will also have to reassure the new customers that they are in safe hands with your company. Many will be wondering who you are, whether you are legitimate and why you were chosen for them. To reassure consumers you need to prove that you are a licensed supplier and provide information on your business, its history and background.

One thing to bear in mind as a SoLR is that different customers will have different needs and issues that will need to be addressed by the supplier.

Prepayment customers, for example, might run into difficulties such as finding it difficult to top up as usual via the previous supplier’s app or website. A delay in sending out new top-up cards will also cause problems and consumers with smart meters might run into problems that will need addressing. Consumers will also likely be confused by what is happening to any existing debts on their meters. Such confusion could lead to them disconnecting their meters or stop using energy entirely so its important to tackle these issues as quickly as possible.

Business customers will have differing needs to domestic ones. Microbusiness credit balances, for example, are not protected under the SoLR. SMEs on the other hand often have many third-party intermediaries that may contact consumers and urge them to switch immediately or provide contradictory advice.

SoLR’s will also have to consider consumers claiming the Warm Home Discount who are likely to have questions such as: Are they still eligible under the new supplier?, Do they need to reapply and when will they get their payment?

What about customers who have electric heating or where on an EV tariff? All these different factors need to be considered and planned for.

Here is a list of what a SoLR should do to ensure that they and affected consumers have the information needed to make the process as smooth as possible:

·Send your company contact details and opening hours to affected consumers

·What tariff the customer will be moved onto and whether it will be more expensive than its previous one

·Instructions to Direct Debit customers and details on what they need to do going forward

·Information to prepay customers and what methods they can use to top up

·Publish a timeline detailing when the consumer can expect to hear from the supplier and when their transfer will be completed

·Send information to smart meter users on how their meter could be affected

·Who will be collecting debts and when?

·Suppliers should have open and clear communications with third parties from the get-go including Ofgem, Citizens Advice and the administrators

With Breeze energy being the 15th energy supplier to have failed over the past two years it is likely that Ofgem will have to wield its SoLR powers again soon.

“Ofgem urgently need to stem the burst main of supplier failures. Breeze is the 15th domestic supplier to fail since the start of 2018, but without more stringent checks on suppliers, there will be a further collapse soon. With more than a million households affected by supplier failures, Ofgem’s proposed improved financial checks and more rigorous testing for existing energy providers cannot be implemented soon enough. With just a week to go before Christmas, Breeze Energy customers can take some comfort that they will still be able to turn on the lights and heating on, with Ofgem taking immediate action to appoint a new supplier,” said Peter Earl, head of energy at comparethemarket.com.

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