What happens if your energy supplier goes bust?

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The energy sector has been in dire straits for several months now.

At current count, 26 energy suppliers have already collapsed this year. And I dare say that the number could be up to 30 by the year’s end.

So far, many of the energy suppliers involved have been smaller firms.

But this week marked a turning point: Bulb, the UK’s seventh biggest energy supplier, announced it was entering special administration.

With this in mind, I wanted to talk about what you should do if your energy supplier goes bust.

If your energy supplier is a small firm…

Every year, a handful of energy firms collapse for various reasons and for consumers, the process is pretty straightforward: take a meter reading, sit tight and wait.

The UK’s energy set up is such that when one firm collapses, the industry regulator Ofgem will appoint another firm to take over its customer base.

For customers, their energy supply won’t be cut off and any existing credits they have on their account will simply be ported over, along with any direct debits for payments. Essentially, it’s business as usual for consumers.

However, once the contract has been taken over by the new firm (the new supplier will be in touch when that happens), they will be put onto a new tariff, which could be more expensive. At this point, it would make sense to scout around for a better deal.

At the moment, that’s not really an option as many energy firms have withdrawn their fixed rate tariffs and the ones that are available are often higher than the energy price cap set by Ofgem – but it’s still worth asking whether you’re being put onto the cheapest tariff.

Aside from taking a meter reading – photograph your meter if you can – you can make the process more straightforward by downloading any bills as well so you know exactly how much credit you have and how much energy you’re using in case of any disputes.

If your energy supplier is a big firm, like Bulb…

Many of the energy suppliers that have been allowed to collapse so far have only had a few thousand customers, which meant it was relatively easy to find another supplier to take over their contracts.

However, Bulb, with 1.7 million customers, was considered too big for this to happen in the same way, which was why it was put into special administration instead of being allowed to simply collapse.

Special administration was something that was introduced as part of the Energy Act in 2011 and it has never been used before.

This bit of legislation allows the insolvent company to continue supplying energy to its customers; and in the case of Bulb, the government has set aside £1.7billion to facilitate this.

Arguably, the handful of energy firms with hundreds of thousands of customers that collapsed earlier this year should have been afforded the same benefit but that’s outside the remit of this post.

Again, it’s business as usual for consumers during the special administration period.

And in fact, it’s even more straightforward because as long as the special administration status continues, customers will see their existing tariffs maintained.

There are no changes to their direct debit details, credits on their account are protected, benefits like the Warm Home Discount will continue and their energy supplier remains the incumbent firm.

Even though the process is more straightforward, it is still worth downloading your bills and taking meter readings as usual, just in case.

What happens next with Bulb

There is no specific end date to the special administration period – it all depends on what happens next.

Bulb could receive a cash injection or be bought out by another firm, for example, which means it won’t collapse at all, and that would be the ideal outcome in this situation.

Its prospects might even improve when Ofgem updates its price cap next year.

Or if that doesn’t happen, its customers may be divided between several different energy firms.

All of that will be determined by Teneo, the special administrator appointed by Ofgem, in due course.