Photo of John Hemming

John Hemming (Birmingham, Yardley, Liberal Democrat)

To ask the Secretary of State for Trade and Industry what contingency plans the Department has to ensure the continued supply of gas in the event of a domestic gas supplier ceasing to trade.

Photo of Malcolm Wicks

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

Since the implementation of the Utilities Act 2000 licensing schemes and standard licence conditions in October 2001, Ofgem has had the power to appoint a Supplier of Last Resort (SoLR) for all customers, domestic and non-domestic, in both the gas and electricity markets. This power is essential to ensure that all of a failed supplier's customers have continuity of supply.

Under the current licence conditions Ofgem can require any licensed gas supplier to become a SoLR and take the responsibility for supplying gas to customers of another supplier whose licence has been revoked. For customers whose annual consumption is reasonably expected to be less than 73,200 kWh the authority can direct a supplier to be a SoLR. For customers whose annual consumption is reasonably expected to be between 73,200 kWh and 2,196,000 kWh the authority can only direct a supplier to be a SoLR with that supplier's consent. There is no provision for appointing a SoLR (by consent or otherwise) for customers whose annual consumption is reasonably expected to be more than 2,196,000 kWh.

Once appointed, a SoLR will initially be supplying the customer on a deemed contract. This deemed contract will cover the period from appointment until customers have agreed a replacement contract with the SoLR or another supplier of their choice. There are licence obligations to ensure that the prices charged under a deemed contract are not excessive. A SoLR's deemed contract must also allow for its termination when the customer chooses to take a supply from another supplier.

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