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Ofgem Minded to Allow Shell Energy’s Supplier of Last Resort Claim

On the 10th of December, 2019, Ofgem announced that it is minded to let Shell Energy claim £354,147 as Last Resort Supply Payment.

The claim by Shell Energy is for all incurred costs while acting as the major Supplier of Last Resort (SoLR) to customers of failed supplier Usio Energy.

On the 15th of October 2018 Usio Energy ceased trading.  First Utility (now known as Shell Energy) was appointed as the SoLR for Usio Energy’s gas and electric customers on the 18th of October 2018 out of submissions from multiple energy suppliers.

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During the SoLR selection process, Ofgem shared that majority of the submissions they have received from suppliers confirmed that the suppliers will honour the credit balances of Usio Energy’s customers, along with credit balances of those customers who have switched away but were still due a credit refund.

Currently, Ofgem is consulting on its proposal before the regulatory body makes a final decision around January 2020. After its decision, the agreed amount would be recovered from the electricity and gas distribution network organizations between 2020 and 2021.

Ofgem’s role when an energy firm ceases trading

Ofgem acts as a regulatory body to every organization that operates and maintains wires and pipes that transport electricity around the United Kingdom.

Ofgem was created to protect the interests of energy consumers, ensure fair competition among energy industries, and ensure that the supply of gas and electricity is secured. Ofgem gathers information about the performance of energy supplying organizations and keeps a record of consumer complaints.

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When a supplier fails, it is Ofgem’s duty is to protect the energy firm’s customers and ensure that customers get continued supply.  During this period, Ofgem also aims to minimize the negative impact of a supplier’s failure on the energy market.

Quickly appointing a Supplier of Last Resort is a way to ensure customers get continued energy supply and lessen the negative impact of the initial firm’s failure to deliver their customer’s needs.

The Supplier of Last Resort selection criteria and other information regarding last resort can be found on Ofgem’s website and is accessible to the public.

If you wish to read on how the SoLR process works and the selection criteria, view Ofgem’s PDF at this link: https://www.ofgem.gov.uk/system/files/docs/2017/09/solr_revised_guidance_final_21-10-2016.pdf

What does the ‘Minded-To’ position mean?

Ofgem recently published that they are minded-to allow Shell Energy’s Last Resort Supplier claim which means if their decision is made final then Shell Energy will be allowed to recover up to the amount requested from the distribution network licensees in 2020/2021.

Shell Energy’s claim is only for the cost of refunding open credit balances to Usio Energy customers when Usio failed.  Shell Energy also confirmed that it incurred other costs during its SoLR position, which they are not including in their claim.

This breakdown shows the full amount of open credit balances and what Shell Energy is claiming LRSP for:

CLAIM ELEMENT COST CLAIMED (£)
Open Customer Credit Balances £769,037
Less Shell Energy Contribution £414, 890
Total LRSP Claim £354,147.00

Ofgem’s Final Decision on Shell Energy’s claim

Ofgem has yet to make a final decision on Shell Energy’s Last Resort Payment claim.

Ofgem is currently in a ‘consultation stage’ where other energy suppliers, energy distributors, and all other interested parties are given an opportunity to provide representations before they make a final decision.

The consultation stage runs from the 5th of December 2019 until the 10th of January 2020.

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Responses received from interested parties are normally published on Ofgem’s website but the interested parties can choose not to make their responses public, by clearly marking their submission with ‘not for publication’.

After consultation closes, all relevant information received will be taken into account, and Ofgem will make their final decision sometime in January 2020.


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Energy Industry News, Gas