How are you protected if your energy supplier goes bust?

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If an energy supplier goes bust, what are your rights? Can you keep the same deal? What happens to any money if you’re in credit? How are you protected if your energy supplier goes bust?

How are you protected if your energy supplier goes bust?

The first thing to say is that if your energy supplier goes bust, you won’t be left without gas or electricity. There are strict rules in place to say that another supplier has to step in and provide gas and electricity. There won’t be a break in supply as it will happen straight away.

There are also rules in place if you’re in credit with your old supplier. It means you won’t lose any money. So, here’s my guide to what you should do and what should happen next.

What you need to do if your supplier goes bust

I wouldn’t recommend immediately switching away from a supplier that’s gone bust. It may seem counter-intuitive but it’s better to wait to find out which company will be supplying your gas and electricity in the future and whether they will do so on the same tariff that you’re on now. But there are some things you can – and should – do.

  1. Take a meter reading. If you haven’t already taken a meter reading, do that now. That way you’ll know how much gas and/or electricity you’ve used while you’ve been with the supplier that’s gone bust.
  2. Watch out for a letter or email from your new supplier. The energy regulator, Ofgem will appoint another energy company to take over the supply. It should get in touch with you to tell you what’s going on.

SAVVY TIP: The process of choosing a new supplier normally starts with a number of energy providers putting themselves forward to be considered. There isn’t a ready made ‘pool’ of suppliers that are prepared to step in. Instead, they bid for the old supplier’s customers.

3.You don’t have to cancel your Direct Debit. The energy regulator, Ofgem, says that you don’t have to cancel your Direct Debit to your old energy supplier. When a new supplier is appointed to supply energy, it will take over the customer accounts.   If you prefer to cancel your Direct Debit, though, it’s not a problem as you can set one up with your new supplier.

SAVVY TIP: All Direct Debit payments have a guarantee. The Direct Debit guarantee promises, among other things, that your bank will give you a refund if the wrong amount is taken.

4. Don’t switch supplier straight away. Why? The reason is that if your account is in credit, it’s better to stay with the new supplier until you know what you have to do in order to get the money you’re owed refunded. It may be that your new supplier will offset the amount you’re in credit by against future bills – if you stay with them. Otherwise, you can get a refund.

SAVVY TIP: If you owe your old supplier money, the new supplier may not ask for this money from you. However, you may be asked to pay back the old company.

Will you pay more?

If a supplier goes bust, there’s no guarantee that you’ll be able to stay on the same tariff when the new supplier takes over. In some cases, this tariff may be quite a lot more expensive. If that’s the case, you may be better off switching as soon as you can. You won’t be charged an exit penalty if you do switch.

SAVVY TIP: Under the rules governing what happens when a supplier stops trading, you are put onto what’s called a ‘deemed contract’. This simply means the contract isn’t one you’ve chosen to be on. This contract can be more expensive than the tariff you’d previously paid because the new energy company has to step in at short notice and take on customers it hasn’t had a chance to credit check.

Will it affect your smart meter?

If you have a smart meter from your old supplier, it may not work with the new supplier. Or another supplier you switch to. It all depends on whether it’s a first generation (otherwise called SMETS1) meter, or if it’s second generation (SMETS2). If your

SAVVY TIP: Suppliers have only recently started installing second generation smart meters since the autumn of 2018 and early 2019.

Switching supplier

You don’t have to stay with the new supplier. Once you’ve found out how you can get any money you’re owed refunded, you can switch to a new supplier if you want to. You won’t have to pay any exit charges.

SAVVY TIP: If you’d already started switching away from the old supplier before it stopped trading, this switch will still go through.

Useful links:

You can find out more about what happens if your energy company goes bust on Ofgem’s website. There’s also specific information about Extra Energy’s supply being provided by Scottish Power.

Related articles:

The ultimate guide to switching energy supplier; save money on gas and electricity

What to do if there’s a meter mix up or you’re billed by the wrong energy supplier

How do smart meters work and what are smart meter problems?

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