If an energy supplier goes bust, what are your rights? Can you keep the same deal and 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 eletricity. There are strict rules in place to say that another supplier has to step in and take over providing gas and electricity. There won’t be a break in supply as it will happen straight away.
There are also rules in place to say that if you are in credit with your energy supplier, you’ll be able to get back any money you’re owed. 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
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.
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.
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 as the new supplier will take over the customer accounts, as well as supplying customers with energy. If you have already cancelled your Direct Debit, it’s not a problem as you can just 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.
What you shouldn’t do
Don’t switch supplier straight away. Why? The reason is that if your account is in credit, it’s better for you to stay with the new supplier until you’ve been told what you have to do in order to get the money you’re owed refunded. It may be that if you stay with the supplier it will be offset against your future bills.
SAVVY TIP: If you owe your old supplier money, the new supplier may not ask for this money from you, but you may have to repay the old one.
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. The last time a large supplier went bust (GB Energy), Co-operative Energy, which took over its supply, charged customers the same rate as they’d been paying previously.
SAVVY TIP: Under the rules governing what happens when a supplier stops trading, you are put onto what’s called a ‘deemed contract’, which 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.
You don’t have to stay with the new supplier. In general terms, when a supplier stops trading, 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.
SavvyWoman email newsletters: If you found this information useful why not sign up now to receive free fortnightly email newsletters with money saving tips and help? You can sign up at the top of any page on the website and your details won’t be passed to any other company for marketing purposes.