Andy Stirk
International law firm Womble Bond Dickinson (WBD), along with Counsel from South Square, has advised insolvency practitioners from Alvarez & Marsal Europe LLP (A&M) on a landmark directions case involving substantial claims from Ofgem and “Suppliers of Last Resort” (SoLRs) in the insolvencies of eight out of ten UK domestic energy suppliers, which will have a significant impact on the returns to the creditors of these insolvent estates.
The case, heard at the High Court last month and the first ever application of its type, was sought by the administrators and liquidators to establish specifically whether Ofgem and the SoLRs have valid claims in respect of the Renewables Obligation and the honouring of customer credit balances, respectively.
Last Friday (11 November), Mr Justice Zacaroli handed down his judgement on the above points:
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- Ofgem does have a provable claim in the insolvent estates for the Renewables Obligation. This is an obligation under energy legislation for energy suppliers to source a proportion of electricity from renewable sources. Prior to 1 September of each year, there is a contingent payment liability – contingent upon the relevant electricity supplier not producing the requisite number of renewables obligation certificates to satisfy its renewables obligation – which becomes a present payment liability provable in the insolvency estates, if the contingency has not been satisfied by the deadline.
- As for the SoLR, appointed pursuant to a SoLR process to ensure domestic customers are guaranteed continuity of supply should a supplier failure occur, Mr Justice Zacaroli ruled that it has a provable claim in the insolvent estates for the credit balances of former customers that it has assumed, paid or otherwise honoured as part of the SoLR process.
A multi-specialist team of WBD lawyers advised A&M, led by partners Andy Stirk (WBD’s National head of restructuring) and Jonathan Dunkley (WBD’s London head of restructuring). They were supported by energy partner Chris Towner as well as associates Harry Rose (restructuring) and Alex Chapman (energy).
Andy Stirk commented: “When it comes to the failure of domestic energy suppliers, Ofgem’s rules and regulations have remained untested and open to interpretation. Given the significant number of supplier failures the industry saw in 2021, the judgment last Friday provides some much-needed clarity on a range of issues for the domestic energy supplier sector and for officeholders adjudicating creditor claims and returning money to the creditors of insolvent estates.”
Ranking in the UK’s top 20 law firms, WBD provides legal expertise in twelve key sectors from across seven offices in the UK and 23 offices in the US. The firm’s UK restructuring and bankruptcy teams advises national and international clients on key issues combining legal expertise and deep sector knowledge.
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