An energy supplier failing sounds like it should be a crisis for its customers. In practice, the lights stay on - Ofgem's Supplier of Last Resort process exists specifically to make sure supply continuity isn't the thing customers need to worry about.
What actually happens
When a supplier becomes insolvent, Ofgem runs a process to appoint a Supplier of Last Resort - an existing, financially sound supplier who takes over supplying the failed supplier's customers, automatically, without any action needed to keep the lights on. There's no gap in physical supply.
What to actually do first
Ofgem's own guidance for this exact moment is specific: take a meter reading, sit tight, and don't switch. Don't start a new procurement exercise the moment you hear the news - wait until Ofgem has appointed the new supplier and that supplier has actually contacted you (unless you already had a switch genuinely in progress before the failure, which continues as planned). In the meantime: take a dated meter reading, save whatever bills and account records you still have access to, and note your current credit or debit position. There's no need to panic about physical supply - that part of the process is designed to be automatic.
What happens to contracts
The terms a customer was on with the failed supplier don't automatically carry over unchanged. Once the transfer completes, the appointed Supplier of Last Resort puts customers onto what Ofgem specifically calls a deemed contract - a contract you haven't actively chosen, which can run for as long as you want it to. It can be more expensive than what you had before, since the new supplier may have had to buy your energy at short notice and is taking on more risk in doing so - but you're not locked into it: there's no exit fee, and you're free to shop around and switch as soon as the transfer is properly in place.
What happens to credit balances
This is the part worth being precise about, particularly for businesses - and it's genuinely the most important fact in this article. Household credit balances are protected under Ofgem's Safety Net. Business credit balances are not. Ofgem is explicit about this: the Safety Net doesn't cover business customer credit balances, because a business customer can apply to the failed supplier's administrators about what it's owed. Ofgem will always try to appoint a new supplier willing to cover all or some of the failed supplier's outstanding credit - but that isn't guaranteed. In many cases, the business simply has to claim the balance back from the administrator, the same way any other creditor would. If your account was sitting well in credit, that's worth knowing before, not after, a failure happens.
What if you owe the failed supplier money?
The reverse situation matters too. Whether an outstanding debt to the failed supplier transfers to the new supplier depends on whether an arrangement is made to take it on - otherwise it can remain payable to the failed supplier or its administrator directly.
Procurement implications
Once the transfer to your deemed contract is actually complete - not before - it's worth treating the tariff you've landed on as a starting point to improve on, not a permanent home. A deemed contract is rarely the cheapest position available, precisely because of the short-notice risk the new supplier took on to get you there. The right sequence matters: secure the transfer first, then re-tender properly. Starting a fresh switch while the appointment process is still being sorted out can make an already messy situation harder, not simpler.
What this means in practice
Supply security isn't the risk here - the process is specifically designed to remove that risk. The commercial clean-up is the part actually worth your attention: don't switch prematurely, know that your credit balance isn't automatically protected the way a household's is, understand what deemed contract you've been moved to, and re-tender properly once the dust has settled rather than accepting the deemed terms indefinitely.
A supplier failure isn't something to panic about, but it's not something to simply wait out either - the tariff and terms you land on afterwards are worth actively managing. If your supplier's failed, or you want your position checked, get in touch.