Clarification of Supplier of Last Resort Obligations under the REC
Summary
Within Schedule 19 – Market Exit and Supplier of Last Resort there is currently no consideration of circumstances where the Replacement Supplier is unable to fulfil its REC obligations in respect of Consumers transferred to them, due to them having little or no control over the processes of the failed supplier or it’s administrator. This change seeks to define when the Replacement Supplier is responsible for obligations relating to the Consumers gained through a Supplier of Last Resort (SoLR) Process.
Latest update and next planned activity
Date of latest update
Latest Update
04/08/2023 - Change Proposal has been withdrawn as agreed with the Proposer. The Problem Statement was addressed through C3-0047 - Updates to PAB Procedures.
Impacts Overview
Impacted Consumers
Electricity
Gas
Domestic
Non-Domestic
Impacted REC Parties and Market Participants
Energy Supplier
Data Collector
Data Aggregator
Impacted REC Documents
Schedule 19 - Market Exit and Supplier of Last Resort
Priority and rationale
Standard
Priority last updated on 29 May 2026
Solution development
Problem Statement
Currently, Replacement Suppliers are responsible for all obligations of the failed supplier from the date and time set out in the Last Resort Supply Direction, this includes a period of time prior to Consumer accounts transferring to the Replacement Supplier’s systems, limiting their ability to fulfil these obligations. This means that a Replacement Supplier may experience issues with the Performance Assurance obligations for which they are responsible, but do not have direct control over. Any breaches of obligations by a Replacement Supplier need to be considered fairly and any limitations the Replacement Supplier may face are taken into consideration.
Proposed solution summary
- As a Consumer when my Energy Supplier goes out of business and I am transferred to a Replacement Supplier, I want my supply transfer to be handled quickly and have confidence that my new Supplier has all the necessary data to set up my account and bill me correctly from the transfer date, and if the Replacement Supplier fails to provide the expected level of service they will be appropriately held accountable.
- As a Replacement Supplier, I want the limitations affecting my ability to meet my REC obligations to be understood by the REC Code Manager and the Performance Assurance Board, so that any breaches of obligations are considered fairly and any limitations are taken into consideration.
- As the Code Manager I want to apply appropriate and proportionate Performance Assurance Techniques, taking in to account the ability of a Replacement Supplier to meet their obligations under the REC.
No documents available.
There is currently no Change Plan.
Original submission
Change details
Paul Saker - EDF
24 Jul 2022
Change details
Clarification of Supplier of Last Resort Obligations under the REC
We are seeking to ensure that, when a Supplier of Last Resort (SoLR) is appointed by Ofgem, that it is clear exactly which obligations they inherit at the point the SoLR Direction takes effect, and where responsibility for meeting the obligations in the REC lies. We are also seeking to ensure that REC governance recognises and accounts for the limitations of the control that the appointed SoLR has when meeting any REC obligations that they have inherited from the failed supplier following a Supplier of Last Resort direction being made. The REC MRA Transition Schedule currently states that a SoLR is ‘subject to the obligations and liabilities related to or connected with the Metering Points contained in its Last Resort Supply Direction’. This will be replaced by the new REC Market Exit and Supplier of Last Resort in REC v3.0 which states that ‘from the date and time set out in the Last Resort Supply Direction’ a SoLR is ‘responsible for all obligations assigned to the Registered Supplier or its Supplier Agents as set out within the Code’. Not only is it not clear which obligations would transfer to the SoLR supplier (for example in the case of inflight Disputed Reads or Erroneous Transfer), the current text does not recognise the limited amount of control that SoLR suppliers often have over the systems, processes and Agents of the failed supplier as the result of a SoLR event; specifically in the period before these customers’ accounts are migrated into their systems. When a supplier is appointed as the SoLR, it is usually the case that the systems and processes of the failed supplier will be operated by an administrator. We have found, especially in the initial period post SoLR, that it can be difficult to gain the cooperation of the administrator whose focus is not meeting REC obligations. We have also found it difficult to engage with Supplier Agents as their contract is with the failed supplier, not the SoLR supplier. If there are any failures to meet REC obligations this is not something that the Replacement Supplier would generally have visibility of, let alone control over. They should certainly not have any associated liability for any failure to meet REC obligations, such as incurring REC Performance charges (if and when they come into effect) before these customers are being migrated to the Replacement Supplier’s systems and processes, which is what the current text would require.
The lack of clarity in the current legal text means that it is not clear which supplier is responsible for meeting specific REC obligations in the event of a SoLR, this creates confusion for suppliers, the Code Manager and consumers as to who exactly is responsible for meeting specific obligations. The current legal text also places an obligation on a SoLR supplier that they may not be able to meet and exposes them to liabilities for non-compliance with REC obligations (such as Performance Assurance charges) as a result. It is unfair for suppliers to be penalised for performance over which they may have little, if any, control. For example: • Suppliers are required to submit monthly reports in line with the Performance Assurance Reporting catalogue (PARC). We require clarity that it is not the SoLR supplier’s responsibility to report on performance for the failed supplier – not only would this relate to events that occurred before the SoLR direction but would be reported from systems that the SoLR will likely not have access to or control over. It is the responsibility of the administrator of the failed supplier to submit any reports on their behalf. • The failed supplier may have created an Erroneous Transfer before their failure which would still need to be resolved – clarity is required as to who exactly is responsible for the resolution of the Erroneous Transfer in those circumstances, recognising that the SoLR has limited control over any actions required by the failed supplier. • A reading dispute might be in progress at the time of the SoLR direction – clarity is required clarity is required as to who exactly is responsible for the resolution of the Disputed Reading in those circumstances, recognising that the SoLR has limited control over any actions required by the failed supplier. Uncertainty over responsibility and concern that they may become liable for obligations they are not able to meet may deter suppliers from putting themselves forward for a SoLR bid.
This REC Change Proposal could result in either (or both) of the following outcomes: 1) Amending the REC Performance Assurance Board (PAB) Terms of Reference to ensure they take the limitations around a SoLR into account when making their determinations. Any issues relating to the previous supplier which are escalated to the REC Performance Assurance Board (PAB) should not result in any action against the SoLR supplier. This flexibility could also apply to the period between the SoLR Direction and actually onboarding the customers into the SoLR’s systems. 2) Amending amend the actual wording in the new SoLR schedule itself to account for the limitations faced by the SoLR – for example , for example through the recognition that the SoLR can only make ‘reasonable endeavours’ to be responsible for the REC obligations of the failed supplier.
These concerns have previously been discussed with Ofgem and RECCo through the Switching Programme’s Regulatory Design User Group (RDUG) and Regulatory Group (RG) - both Ofgem and the REC PAB have indicated they would be supportive of this REC Change Proposal being raised.
Impacts
Electricity, Gas, Domestic Prepayment, Domestic Credit, Microbusiness, Small and Medium Enterprise (SME), Industrial and Commercial (I&C)
Switching experience, Trust and confidence
It will ensure that that there is clarity as to exactly where responsibility lies for meeting obligations in the REC,that may have a direct impact on consumers and their experience.
Schedule 19 - Market Exit and Supplier of Last Resort
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Energy Suppliers, Data Collectors, Data Aggregators
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Priority & timing
No
N/A
Not specifically - however given recent supplier exists and the ongoing instability in the market it would be good to have clarity on these obligations as soon as possible.
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No details provided
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Activity
Proposed solution summary changed to As a Consumer when my Energy Supplier goes out of business and I am transferred to a Replacement Supplier, I want my supply transfer to be handled quickly and have confidence that my new Supplier has all the nece…
Proposed solution summary changed to As a Consumer when my Energy Supplier goes out of business and I am transferred to a Replacement Supplier, I want my supply transfer to be handled quickly and have confidence that my new Supplier has all the necessary data to set up my account and bill me correctly from the transfer date, and if the Replacement Supplier fails to provide the expected level of service they will be appropriately held accountable.As a Replacement Supplier, I want the limitations affecting my ability to meet my REC obligations to be understood by the REC Code Manager and the Performance Assurance Board, so that any breaches of obligations are considered fairly and any limitations are taken into consideration.As the Code Manager I want to apply appropriate and proportionate Performance Assurance Techniques, taking in to account the ability of a Replacement Supplier to meet their obligations under the REC..
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