Reed Smith Client Alerts

An industry under pressure - the legal landscape for distressed energy supply markets

Rising wholesale gas prices have led to a fundamental pricing mismatch for energy suppliers unable to pass on higher costs to consumers due to tariff caps imposed by Ofgem.

The consequent distress in the market is evident with 9 supplier insolvencies in the last few weeks alone, including Avro Energy, Utility Point and People’s Energy.

Today, 1 October 2021, is important as Ofgem is due to increase tariff caps from that date. This is also the date when the restrictions on petitioning for the winding up of companies on the basis of insolvency will be eased.

Legal landscape – energy regulations

In distressed situations, there are a number of issues to navigate, including:

1. Reporting obligations for suppliers: obligations include a requirement to notify Ofgem if:

  • The supplier is insolvent
  • There is a change in senior leadership
  • The supplier engages in a customer book sale