London Daily

Focus on the big picture.
Saturday, May 31, 2025

Energy crisis: Ofgem faces legal hearing over bust suppliers' millions

Energy crisis: Ofgem faces legal hearing over bust suppliers' millions

A case involving top insolvency practitioners could determine Ofgem's right to rank as a senior creditor in the insolvencies of dozens of energy companies.

The energy regulator's ability to claim hundreds of millions of pounds from the remnants of collapsed suppliers is facing a legal intervention brought by top insolvency professionals.

Sky News has learnt that three leading firms of administrators are seeking a court ruling to determine where Ofgem should rank as a creditor in the collapses of a trio of gas and electricity companies.

City sources said that a directions hearing due to take place in London on Thursday would be of "huge importance" in determining whether billpayers face yet higher costs at a time of already-soaring prices.

The three insolvency practitioners - Alvarez & Marsal, Grant Thornton and Teneo Restructuring - are understood to be seeking a determination on Ofgem's rights to claim outstanding Renewables Obligation Certificate payments from administrators.

Ofgem is the regulator for the UK' energy sector


More than two dozen suppliers have gone bust since last August, forcing millions of UK households to switch energy suppliers.

The largest, Bulb Energy, fell into a regime called special administration, meaning it was taken over by the government and funded by taxpayers until its assets can be sold.

All of the other collapsed suppliers - the largest of which was Avro Energy, with more than 500,000 customers - became insolvent, with their customer bases taken on under a mechanism known as the Supplier of Last Resort (SOLR).

Insiders said on Wednesday that this week's court hearing was also likely to determine whether the energy companies that had taken on customers through the SOLR system were entitled to file claims for customer balances.

Ofgem is understood to be a participant in the hearing, while British Gas, which is owned by Centrica, is also said to have been involved in the proceedings at an earlier stage.

The hearing is significant because it could set a precedent for how Ofgem is treated as a creditor in the insolvency proceedings of many of the more than 25 suppliers which have failed in the last six months.

Any direction issued by the court could therefore have an impact on whether Ofgem has the right to claim sums estimated to be worth hundreds of millions of pounds or whether those costs might have to be absorbed by the rest of the sector.

One source said the need for the legal hearing highlighted a major gap in Britain's energy sector regulation and said that those who devised it had failed to take into account the possibility of a large number of supplier failures.

On Wednesday, Ofgem said it would introduce two short-term measures in an attempt to help stabilise the UK retail energy market.

The regulator will force suppliers to offer existing customers the same tariffs as new ones, while suppliers will also have to pay peers a charge when they take on one of their customers, but only if wholesale energy prices fall sharply.

"Alongside tougher financial regulation, this will make sure that energy companies do not take disproportionate financial risks and suppliers who have done the right thing by purchasing energy in advance for their customers aren't penalised," an Ofgem spokesperson said.

The rise in gas and electricity charges, which will see the industry cap on average household prices soar by more than 50% to a maximum of £1,971 in April, has sparked urgent government intervention.

Earlier this month, Rishi Sunak, the chancellor, announced a £350-per-household support package to tackle the rising energy prices - a move that was criticised both as inadequate and poorly targeted.

Ofgem itself has been stung by criticism from a multitude of stakeholders about its handling of the crisis.

Jonathan Brearley, the watchdog's chief executive, told MPs this month that it should have been "more careful" about the financial resilience of new suppliers entering the market.

Some industry observers now expect the government to seek to reform or abolish Ofgem in its current form ahead of the next general election.

Centrica did not respond to several requests for comment about Thursday's court hearing, while the three sets of administrators all declined to comment.

Ofgem told Sky News: "We do not comment on ongoing legal proceedings".

Newsletter

Related Articles

0:00
0:00
Close
Satirical Sketch Sparks Political Spouse Feud in South Korea
Indonesia Quarry Collapse Leaves Multiple Dead and Missing
South Korean Election Video Pulled Amid Misogyny Outcry
Asian Economies Shift Away from US Dollar Amid Trade Tensions
Netflix Investigates Allegations of On-Set Mistreatment in K-Drama Production
US Defence Chief Reaffirms Strong Ties with Singapore Amid Regional Tensions
Vietnam Faces Strategic Dilemma Over China's Mekong River Projects
Malaysia's First AI Preacher Sparks Debate on Islamic Principles
White House Press Secretary Criticizes Harvard Funding, Advocates for Vocational Training
France to Implement Nationwide Smoking Ban in Outdoor Spaces Frequented by Children
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
Russia's Fossil Fuel Revenues Approach €900 Billion Since Ukraine Invasion
U.S. Justice Department Reduces American Bar Association's Role in Judicial Nominations
U.S. Department of Energy Unveils 'Doudna' Supercomputer to Advance AI Research
U.S. SEC Dismisses Lawsuit Against Binance Amid Regulatory Shift
Alcohol Industry Faces Increased Scrutiny Amid Health Concerns
Italy Faces Population Decline Amid Youth Emigration
U.S. Goods Imports Plunge Nearly 20% Amid Tariff Disruptions
OpenAI Faces Competition from Cheaper AI Rivals
Foreign Tax Provision in U.S. Budget Bill Alarms Investors
Trump Accuses China of Violating Trade Agreement
Gerry Adams Wins Libel Case Against BBC
Russia Accuses Serbia of Supplying Arms to Ukraine
EU Central Bank Pushes to Replace US Dollar with Euro as World’s Main Currency
Chinese Woman Dies After Being Forced to Visit Bank Despite Critical Illness
President Trump Grants Full Pardons to Reality TV Stars Todd and Julie Chrisley
Texas Enacts App Store Accountability Act Mandating Age Verification
U.S. Health Secretary Ends Select COVID-19 Vaccine Recommendations
Vatican Calls for Sustainable Tourism in 2025 Message
Trump Warns Putin Is 'Playing with Fire' Amid Escalating Ukraine Conflict
India and Pakistan Engage Trump-Linked Lobbyists to Influence U.S. Policy
U.S. Halts New Student Visa Interviews Amid Enhanced Security Measures
Trump Administration Cancels $100 Million in Federal Contracts with Harvard
SpaceX Starship Test Flight Ends in Failure, Mars Mission Timeline Uncertain
King Charles Affirms Canadian Sovereignty Amid U.S. Statehood Pressure
Trump Threatens 25% Tariff on iPhones Amid Dispute with Apple CEO
Putin's Helicopter Reportedly Targeted by Ukrainian Drones
Liverpool Car Ramming Incident Leaves Multiple Injured
Australia Faces Immigration Debate Following Labor Party Victory
Iranian Revolutionary Guard Founder Warns Against Trusting Regime in Nuclear Talks
Macron Dismisses Viral Video of Wife's Gesture as Playful Banter
Cleveland Clinic Study Questions Effectiveness of Recent Flu Vaccine
Netanyahu Accuses Starmer of Siding with Hamas
Junior Doctors Threaten Strike Over 4% Pay Offer
Labour MPs Urge Chancellor to Tax Wealthy Over Cutting Welfare
Publication of UK Child Poverty Strategy Delayed Until Autumn
France Detains UK Fishing Vessel Amid Post-Brexit Tensions
Calls Grow to Resume Syrian Asylum Claims in UK
Nigel Farage Pledges to Reinstate Winter Fuel Payments
Boris and Carrie Johnson Welcome Daughter Poppy
×