When an energy company goes bankrupt, consumers have security of supply for gas and electricity.[1] Consumers are not left out in the cold or in the dark after their energy company goes bankrupt.
The question is, though: does the old contract remain in place or is there a new contract (with new prices)? Heleen Wessel-Krijger explains the importance of this distinction in this article.
What happens after energy supplier bankruptcy?
Based on the Electricity Act 1998 Security of Supply Decree (the Decree), there are two options in the event of bankruptcy:
- the customers of the bankrupt power company are transferred to another power company pursuant to an agreement with the trustee or (failing that);
- the customers, after distribution of the bankruptcy estate, will automatically switch to another energy supplier on the instructions of the ACM (Authority Consumer & Market).
Customer base acquisition
There is a legal procedure to ensure this security of supply.
In principle, the liquidator of the bankrupt energy company has 20 business days to sell the customer base of bankrupt company to another energy supplier.[1] During this period, the customers of the energy company may not switch. The sale entails that the existing energy contract with the bankrupt energy company is transferred to the new supplier,[2] the pre-existing energy contract is continued under the same conditions with the customer
Residual distribution
If the receiver does not manage to "sell" all customers, the grid operators distribute the remaining customers among all other energy suppliers (the residual distribution) based on a direction from the ACM (Authority Consumer & Market).[4]
In a residual distribution based on a designation, a new contract for the supply of gas and energy is established between the new energy supplier and the consumer by operation of law. This distribution of customers is done in proportion to the number of consumers the other energy companies have. The national grid operators TenneT and GTS coordinate this residual distribution.
Bankrupt energy supplier in (legal) practice
Third option in energy supplier bankruptcy?
In 2018, Flexenergie B.V. was declared in bankruptcy. Innova Energie B.V. (Innova) argues in a recent ruling[1] that, in addition to the two legal possibilities (transition of the existing energy contract on the basis of an agreement with the receiver or transition by operation of law on the basis of a designation by the ACM), there would be a third possibility in which the existing customers of a bankrupt energy supplier would be transferred to a new supplier
According to Innova, there is no real designation by the ACM, but a forced intermediate form, where the ACM agreed to the transfer of the customer portfolio of the bankrupt Flexenergie by the receiver without any freedom of contracting. All connections will switch to a model contract with a variable tariff whether the customer wants it or not.
Judgment of Subdistrict Court
The subdistrict court does not go along with this. Taking over only the "customer base," without taking over the underlying energy agreements, is a figure that does not appear in the Decree. Innova should have informed the acquired customers that it took over the agreements with Flexenergie under the existing conditions.
The subdistrict court rules that the failure to properly inform is an unfair trade practice making the new supply agreement voidable. The court annuls it in part, insofar as it relates to the payment obligation.
A buyer who wants to buy a customer portfolio of consumers from the receiver of a bankrupt energy company must therefore take into account that the existing energy contracts with those customers will continue under the same conditions. In a market where energy prices are rising, it is therefore advisable to take this into account when considering a possible purchase of a customer portfolio.
[1] Electricity Act 1998 Security of Supply Decree (the Decree), Section 2.
[2] Pursuant to Article 5 of the Decree.
[3] Under Article 2(5)(b) of the Decree.
[4] Based on Article 6 of the Decree.
[5] Amsterdam District Court October 7, 2022, ELCI:NL:RBAMS:2022:6000.
