- Ofgem’s 2026 Supplier Financial Resilience Report shows that domestic suppliers held £6.8 billion in regulatory capital in March 2026, more than double the £3.1 billion aggregated capital target.
- Two suppliers failed in 2025‑26, affecting around 95,000 domestic and 18,000 non‑domestic customers, yet the resulting shortfall in renewables obligation payments was just £23 million, below the level that triggers wider cost sharing.
- Ofgem has cut decision times for new licence applications from nine to six months and reviewed six commercial transactions to protect customers. Aggregate profitability is forecast to recover slightly from 2025 lows, but Ofgem warns of continued geopolitical and wholesale price volatility.
Britain’s energy retail market is in a healthier financial position than it was during the 2021‑22 crisis, but the sector is not out of the woods.
Ofgem’s latest Supplier Financial Resilience Report, published on 9 June, concludes that energy suppliers have significantly strengthened their capital positions since new rules were introduced in 2025. However, the regulator warns that ongoing geopolitical shocks, high wholesale prices and customer credit balances still pose risks and that it will continue to take a risk‑based approach to supervision.
In response to the 29 supplier failures that rocked the retail market during the 2021‑22 gas price spike, Ofgem rolled out a suite of financial resilience rules. Suppliers must now hold minimum capital buffers relative to their customer bases, ring‑fence renewable obligation payments and maintain robust liquidity.
The 2026 report suggests these measures are working: the domestic supply sector held £6.8 billion of regulatory capital in March 2026 against an aggregate target of £3.1 billion, meaning suppliers carried more than twice the required capital. 21 of 24 suppliers were above their capital targets, while Ofgem is working closely with the three that fell short to enforce capitalisation plans.
Ofgem also monitors customer credit balances to prevent suppliers from using advance payments as working capital. In March 2026, suppliers held £2.7 billion in cash against £1.9 billion of domestic credit balances. The regulator notes that ensuring suppliers are not overly reliant on customer funds remains a priority.
Failures down, consumer costs lower
Only two suppliers failed in 2025‑26, compared with none the previous year and dozens during the crisis. Roughly 95,000 domestic and 18,000 non‑domestic customers were transferred to new suppliers through the supplier‑of‑last‑resort (SoLR) mechanism.
Because the failing companies had complied with the capital‑target regime, the Renewables Obligation shortfall was limited to £23 million, far below the threshold at which the cost would have been mutualised across all suppliers.
By comparison, levy costs added about £64 to the average bill during the height of the crisis. In 2025‑26, £86.5 million was returned to consumers through SoLR levy decisions.
Ofgem reviewed six commercial transactions transferring customers or changing ownership, ensuring consumer interests were protected and preventing potentially risky entrants. The regulator also cut the timescale for processing new licence applications to six months from nine, reflecting a shift towards more efficient oversight.
Profitability and ongoing risks
Aggregate profitability in the domestic supply market has recovered from 2025 lows and is forecast to increase slightly in the coming year. However, Ofgem notes that the global context remains volatile.
The ongoing conflict in the Middle East has disrupted gas supplies and contributed to high wholesale prices, while the transition away from fossil fuels requires significant investment. The regulator emphasises that it does not operate a “zero‑failure” regime and that some supplier exits are expected in a competitive market.
Risk‑based supervision will continue, with particular attention to capital adequacy, liquidity, governance and customer money.
Ofgem also pledges to work with government and industry to support a resilient and innovative supply market that underpins the net‑zero transition. The report sits within the regulator’s Markets Regulatory Vision and Strategy to 2030, which aims to deliver proportionate, outcomes‑based regulation.
The 2026 report offers a positive contrast with the chaos of the early 2020s, when dozens of suppliers collapsed under the weight of soaring gas prices and inadequate hedging. The combination of higher capital requirements, ring‑fencing of customer funds and tighter entry rules has created a more robust sector.
Yet fragility remains. Wholesale energy prices remain elevated and volatile, and the shift to electrification will increase suppliers’ exposure to power market fluctuations. Smaller suppliers may struggle to maintain capital buffers if margins are squeezed by price caps, bad debt or abrupt demand shifts.
Moreover, the cost of complying with resilience rules could deter new entrants, potentially reducing competition and innovation in the retail market.
