Ofgem’s New SoLR Levy Offset Rule: What It Means for Your Business Energy Costs

When an energy supplier fails and exits the market, the process of transferring customers carries costs. For years, those costs have been passed back to consumers through the Supplier of Last Resort (SoLR) levy, leaving businesses and households to shoulder expenses caused by supplier failures. Recent reforms from Ofgem are designed to change that.

Ofgem confirmed a new SoLR Levy Offset rule that will reduce the financial burden on consumers when suppliers collapse. For businesses, it’s a small but significant step toward greater fairness, transparency, and stability in the energy market.

In this article, we discuss what exactly has changed, and why it matters to your business.

The Impact of Supplier Failures on Energy Customers

The wave of supplier failures in 2021 and 2022 is still fresh in many people’s minds. More than 30 suppliers went under, leaving millions of customers displaced and requiring transfer to a new energy supplier through the SoLR process. Notable cases include Bulb Energy, which was placed into special administration with 1.6 million customers protected via government-funded support, and Avro Energy, which had approximately 580,000 customers transferred to Octopus Energy. 

The financial fallout from these failures has been substantial. The National Audit Office estimated that between June 2021 and June 2022, the supplier failures cost consumers roughly £2.7 billion. These costs include wholesale energy purchased above the price cap by suppliers of last resort, shortfalls from failed suppliers missing payments into government schemes, honouring customer credit balances left by failed suppliers, and the operational costs of transferring accounts.

Until now, the system bundled the financial consequences of a supplier’s collapse into the broader customer base, with the burden spread across all energy bills. For business energy customers, the impact was felt in unpredictable cost increases and a general sense of instability across the market. 

New Reforms: The SoLR Levy Offset Rule

Under the new Levy Offset rule announced by Ofgem, failed suppliers will now remain liable for the costs of their collapse. Here’s how it works:

• When a supplier fails, another supplier steps in under the SoLR process to take on their customers.
• That new supplier can claim the additional costs of doing so through the SoLR levy.
• Previously, those costs were passed directly to consumers.
• Under the reform, costs claimed under the SoLR levy remain a liability of the failed supplier, recoverable through insolvency proceedings where assets are available.

In practice, this means that instead of customers automatically absorbing the fallout, costs will first be reclaimed from the failed company’s remaining assets, and shareholders do not benefit from any remaining value until the costs of keeping customers on supply have been covered. It should be noted that insolvency recoveries may not cover everything, but it does shift responsibility in the right direction.

While the wave of major supplier failures during the peak of the energy crisis is now behind us, these reforms provide an important safeguard for the future. Some might argue that protection for customers should have been in place earlier, but the Levy Offset rule is a welcome step towards strengthening resilience in the market and ensuring that customers are less exposed should a supplier fail again.

Why This Matters for Your Business

For business energy customers, this reform has several important implications:

Reduced Risk of Bill Shock

The Levy Offset reduces the likelihood that sudden supplier failures will feed into higher non-commodity charges on your bills. While not eliminating the risk entirely, it’s a step toward reducing volatility in the market.

Greater Accountability in the Sector

The rule enforces the simple principle that suppliers must take more responsibility for their own risks. This is part of a wider package of reforms designed to ensure suppliers are financially resilient. For businesses, that translates into a fairer, more accountable market.

More Confidence in Energy Procurement

With the Levy Offset rule in place, customers have greater clarity about how costs from supplier failures are handled. This gives businesses seeking a new energy supplier the ability to focus on comparing contracts, assessing service quality, and aligning energy choices with sustainability goals, rather than worrying about unexpected charges.

Strengthening Supplier Resilience

The Levy Offset reform is part of a broader series of measures introduced by Ofgem to improve the financial stability of energy suppliers. These include minimum capital requirements and rules allowing Ofgem to direct suppliers to ringfence customer credit balances when it is in the consumer interest.

As a result of these interventions, suppliers have moved from net negative assets during the energy crisis to adjusted net assets of £7.5 billion. This financial buffer helps absorb potential losses, reducing the likelihood of failure and protecting consumers from the costs associated with supplier collapses. At the same time, it allows suppliers to focus on improving service standards and investing in new, innovative products.  

Together, these changes are intended to create a more stable, resilient marketplace where the risk of supplier failures is lower, and the consequences are less punishing for customers if they do occur.

What Businesses Should Keep in Mind When Choosing a Supplier

Choosing the right energy supplier remains a critical decision for any business. Stability, financial strength, and reliable service are just as important as price, helping to avoid operational disruption and unexpected costs. The Levy Offset rule provides additional protection for customers if a supplier does fail, but it doesn’t remove the need for careful supplier selection.

That’s why it’s essential to work with a broker who vets suppliers carefully, considering stability and service quality alongside competitive pricing to ensure you’re partnering with a reliable provider that is right for your specific business needs.

Make Smarter Energy Decisions with the Right Partner

Ofgem’s Levy Offset reform is a positive step toward protecting businesses from the wider costs of supplier failures. However, long-term security and cost control come from partnering with a trusted advisor who can guide you through the complexities of the energy market.

At Smarter Business, we help you:

• Find business energy contracts that align with your objectives, balancing price, reliability, and service quality.
• Stay informed about regulatory changes, including reforms like the Levy Offset, so you can anticipate market developments.
• Manage risk and optimise costs through proactive supplier assessment, contract management, and tailored energy strategies.

Combining market insight, supplier knowledge, and a client-focused approach, we help your business make strategic energy decisions that support operational resilience and long-term growth.
Contact us today to see how Smarter Business can help you navigate the market, reduce costs, and plan confidently for the future.