Tonik Energy goes bust: what happened, and why so many suppliers failed

What happened to Tonik Energy?

Tonik Energy was a UK green energy supplier that ceased trading in September 2021. It was one of many suppliers to collapse during that autumn's energy crisis, when a sudden surge in wholesale prices pushed a string of companies out of the market in quick succession.

For customers, the most important point is that a supplier going bust does not cut off your gas or electricity. The energy networks keep delivering supply, and the regulator steps in to move affected customers to a new company. Tonik's customers were protected in exactly this way.

The Supplier of Last Resort process

When a supplier fails, Ofgem uses a process known as the Supplier of Last Resort, or SoLR. The regulator appoints another licensed supplier to take on the customers of the failed company, ensuring that supply continues seamlessly and that customers are not left stranded.

In practice, the process works like this:

• Ofgem invites suppliers to bid to take on the failed company's customers;
• a new supplier is appointed and customers are transferred automatically;
• the new supplier contacts customers to explain the change and set up their accounts;
• customers are free to switch away later without exit fees once they are settled.

Ofgem's standing advice in these situations is to sit tight, take a meter reading, and wait to be contacted by the new supplier rather than trying to switch immediately.

What happens to your credit balance?

A common worry when a supplier fails is losing any credit built up on the account. Under the SoLR process, credit balances are protected for both current and former domestic customers, and the appointed supplier honours them.

The transfer is not instant. It can take several weeks for the new supplier to receive account details, reconcile balances and issue new statements, so a little patience is needed. Keeping a note of your final meter readings and any statements from the failed supplier makes the process smoother.

Why did so many suppliers fail in 2021?

The collapse of Tonik and others was not a run of bad luck but the result of a structural squeeze. During 2021, the wholesale price of gas — which also sets much of the cost of electricity — rose steeply. At the same time, the domestic energy price cap limited how much suppliers could charge household customers.

That combination proved fatal for suppliers who had not hedged, meaning they had not locked in the cost of the energy they needed to serve their customers. They found themselves buying energy on the open market for far more than the capped price at which they were allowed to sell it, losing money on every customer.

Larger, better-hedged suppliers were more insulated, but many smaller and newer companies had thin margins and little financial cushion. As prices kept climbing, a significant number of suppliers failed over a matter of months, reshaping the UK retail energy market.

What to do if your supplier fails

If you ever find yourself in the same position as a Tonik customer, the steps are straightforward: do not panic, do not switch straight away, and wait for your new supplier to make contact. Take a meter reading on the day you hear the news, and keep any final bills or statements safe.

Once your account has moved across and settled, you are free to compare the market and choose a deal that suits you. To understand who regulates the market and how you are protected, read our guide to Ofgem, and browse our overview of energy suppliers.

Frequently asked questions