Ofgem plans to end temporary last resort supply payment claim process

The energy regulator seeks industry feedback on reverting to single-claim process and implementing internal audits for Last Resort Supply Payments

In a bid to adapt to evolving market conditions, Ofgem is proposing to end the temporary multiple claim process for Last Resort Supply Payments (LRSPs).

This move follows a period of unprecedented wholesale price increases and supplier failures, which placed significant strain on the energy market.

With many energy suppliers facing financial difficulties, Ofgem had to oversee a lot of quick changes in the energy market.

New suppliers taking over had to buy energy at very high prices, but couldn’t charge customers more because of price limits.

To help them recover their costs faster, Ofgem introduced a temporary process that made it quicker to submit and decide on claims, especially for wholesale costs.

As the market stabilised and prices started to decrease in 2023, Ofgem observed improved conditions compared to when the temporary process was introduced.

To address these changing circumstances, Ofgem proposes terminating the temporary multiple claim process on 31st August.

Any LRSP claims submitted from 1st September will be processed using the previous single claim process, except for claims made under existing True-up Agreements.

Suppliers will likely revert to competitive bidding, potentially waiving their right to levy claims, in scenarios where a SoLR is required.

In addition, Ofgem suggests introducing an internal audit requirement for LRSP claims under the single claim process.

This proposal entails independent audits accompanying each LRSP claim submitted for Ofgem’s consent.

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