Understanding what happens when an energy supplier fails

11 November 2025

With news that gas and electricity supplier Tomato Energy has ceased trading, Tom Russell, R3 president explains what happens next when an energy supplier fails.

Finding a supplier of last resort

When an energy supplier becomes insolvent, Ofgem acts to ensure affected customers continue to receive essential services by appointing a new supplier, known as a Supplier of Last Resort (SoLR).

In the case of Tomato Energy, Ofgem has appointed British gas and has also confirmed that energy provision and funds, including credit balances, are secured. British gas will contact former customers of the failed firm in the coming days and has advised customers to take a meter reading in the meantime.

Before appointing an SoLR Ofgem usually invites suppliers to express interest and assesses them against specific criteria. If necessary, it can direct a supplier to take responsibility for the failed company’s customers.

Once a SoLR has been identified and appointed, the insolvent company’s gas and electricity supply licences are revoked. At that point, the company is no longer a regulated company and can be placed into administration or any other insolvency process.

Impact on customers

When a SoLR is appointed, they take over as the energy supplier for customers of the failed firm. The new firm will continue to supply energy and assume responsibility for billing. Ofgem explains that it will ‘make sure customers energy supply will continue as normal, domestic customers’ credit balances are protected and that the process in moving over to the appointed supplier is as smooth and hassle free as possible.’

Alternative solutions

Although another supplier has been found in the case of Tomato Energy, Ofgem can place an energy company into a special administration regime known as Energy Supply Company Administration if it considers that using its SoLR powers would not be feasible. This has only happened once in the energy sector and is intended as a contingency.

This process, which was introduced through the Energy Act 2011, aims to ensure that a large energy supply company in financial difficulty can “continue trading normally, potentially with financial assistance from the Government if the company is unable to secure funding from commercial sources, until it is either rescued, sold or its customers transferred to other suppliers”.

The purpose is to protect the market from the sudden impact of the failed supplier’s debt, reducing the risk of financial shock spreading across the market.

The role of an insolvency practitioner

Insolvency practitioners are usually appointed when an energy firm enters administration. They act on behalf of the company’s creditors, including employees, customers, HMRC and others, providing regular updates to stakeholders and making decisions guided by statutory duties and regulatory frameworks, while seeking to maximise returns to creditors.

In energy insolvencies, they are especially mindful of the need to treat customers fairly and sensitively and will usually have a policy in place for collecting debts. This policy will outline the steps they will take to understand why a customer may struggle to pay a bill, as well as how they will manage these situations.

In conclusion

While the failure of an energy supplier can cause understandable concern, Ofgem’s safeguards and the role of insolvency practitioners help to ensure that customers remain protected and that the market continues to operate smoothly.