In response to the glut of energy supplier insolvencies over the last 3 years, Ofgem has written an open letter to insolvency practitioners (IPs) in an attempt to remind IPs of the need to treat energy customers fairly and expeditiously, and in the manner which they would expect to be treated by any energy supplier, irrespective of the failure of the relevant supplier.

The letter covers:

  • Ofgem's role when energy suppliers fail;
  • an insolvency practitioner's role when energy suppliers fail; and
  • Ofgem's engagement with, and expectations of, insolvency practitioners.

A summary of the letter is below and a link to the full version of the letter is available here > 

Ofgem's role

The principle role is for Ofgem to protect the interests of existing and future electricity and gas customers, given that energy is considered to be an essential supply.

Ofgem achieve their objective by intervening where necessary to oversee the "Supplier of Last Resort" (SoLR) mechanism, pursuant to which Ofgem invite bids for the failing supplier's customer contracts before transferring such contract to the successful bidder. 

Insolvency practitioner's (IP) role

Whatever the circumstance facing them, Ofgem expect the IP to ensure customers are treated fairly and that any issues are quickly identified and resolved.  There are three common scenarios that have faced IPs on recent failed energy suppliers:

  • the SoLR buys the debt book – the IP has little or no interaction with customers and is expected to generate final billing positions and agree those with the SoLR;
  • the SoLR acts as collection agent on behalf of the IP – again, the IP has little or no interaction with customers and is expected to generate final billing positions and agree those with the SoLR;
  • the SoLR does not take on the customer debt book and takes no part in collection – the IP is expected to generate final billing positions and agree those with the SoLR before collecting the debt directly from the customers.  It is this third area, where IPs have extensive interactions with consumers, that has not been to Ofgem's universal satisfaction.

Ofgem's engagement with IPs

Ofgem has no regulatory powers in respect of governing IPs.  Ofgem therefore will look to work collaboratively to achieve their aim (of a smooth SoLR process), albeit Ofgem recognise that there has been differing levels of engagement, co-operation and quality in the IPs they have experienced to date.  The open letter sets out a plea for IPs to recognise and respect the rights and position of customers, and reminds IPs of specific points including that:

  • energy customers should not be pursued to unbilled usage older than 12 months;
  • customers should be given an opportunity to settle, query and challenge their bill; and
  • debt collection agents ought to behave and communicate with customers in accordance with the expectations of a domestic energy customer.

Conclusion

Ofgem have clearly observed a range of working practices from IPs and their appointed debt collection agents, recognising some very good but also some disappointing performances.  The guidance is a plea for IPs to treat customers in the manner which they are accustomed to being treated, and sets out in its appendix a list of requirements to ensure that a good customer outcome can be achieved.  

Given Ofgem's lack of regulatory powers in respect of IPs, it remains to be seen whether the poor performances that have disappointed Ofgem can be eradicated.

Key contacts

Andy Bates

Andy Bates

Partner, Business Support and Restructuring
Leeds, UK

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Jamie McIntosh

Jamie McIntosh

Partner, Business Support and Restructuring
Edinburgh

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