Administrators seek directions on energy supplier debts

Numerous failed suppliers had their energy supply licences revoked by Ofgem, the energy regulator.

Prior to having their licences revoked, the failed suppliers were required annually to produce renewables obligations certificates (ROCs) to the Gas and Electricity Authority (GEMA), which delegates its functions to Ofgem. The obligation arose from the Secretary of State’s orders made pursuant to the Electricity Act 1989. ROCs were provided to suppliers where they sourced electricity from renewable sources. If a supplier could not provide sufficient ROCs to GEMA by a prescribed date, they could discharge their obligation by making payment into a fund within a prescribed period. If there was a fund shortfall, it was mutualised through further payments by those energy suppliers who had satisfied their ROCs obligation in whole or part.

The officeholders questioned whether the failed suppliers’ ROCs liability continued and constituted a provable debt in the failed suppliers’ insolvencies where the cost of said liability had already been mutualised / shared amongst the compliant suppliers.

The court held that a supplier had a primary obligation to provide ROCs and failing that, a secondary obligation to pay into the fund. The fund payment liability was a provable debt (initially being a contingent liability during the period in which ROCs could be provided to GEMA). The failed supplier’s ROCs liability continued following their supply licence revocation (due to the absence of any provision to the contrary). The mutualisation did not release the failed suppliers of their outstanding ROCs liability.

Croxen v Gas and Electricity Markets Authority [2022] EWHC 2826 (Ch)