First Utility has been chosen as the supplier of last resort to rescue the customers of failed energy retailer Usio Energy, which ceased trading on Monday (15 October).

Around 7,000 customers will be transferred to First Utility after Ofgem selected the supplier following a competitive tender process.

First Utility is offering Usio Energy’s customers a “competitive tariff” and will honour all outstanding credit balances, including money owed to both existing and former customers of Usio Energy.

For existing customers, energy supplies will continue as normal as they switch over to First Utility tomorrow (19 October). Any credit on their account can be used to offset future energy use. First Utility will contact former customers directly about their refund, if appropriate.

The cost of protecting customers’ credit balances will be partly met by First Utility, and the rest will be covered by the safety net put in place by Ofgem. This is funded by a levy spread across all energy suppliers.

Colin Crooks, chief executive of First Utility said: “First Utility is very pleased to be able to step in and help those customers who have been let down by the failure of Usio this week.

“Under Ofgem’s process, Usio customers will move to First Utility with their credit balances protected and supply uninterrupted.

“Customers don’t need to do anything at this point, we will be in contact with every customer shortly to welcome them to First Utility and explain next steps.”

Customers of Usio Energy will be contacted by First Utility over the coming days and again in a few weeks when their accounts are fully set up.

Ofgem said at that point, if customers wish to change their tariff, they should ask First Utility to switch them to another deal, or shop around.

Customers will not be charged exit fees if they decide to leave First Utility or if they decide to switch supplier before the transfer has been completed.

Philippa Pickford, interim director at Ofgem, said: “We are pleased to secure a deal with First Utility, where Usio Energy’s customers will be offered a competitive tariff for their energy. Their credit balances will be honoured and their energy supply will continue as normal.

“Our advice for customers of Usio Energy is to wait until First Utility contacts you. They will give you more information about the tariff you are on, and about your credit balance if you have one. Then you can shop around for a better deal if you wish to.”

Usio said it was threatened with a “substantial damages claim” by one of its former service providers before it ceased trading.

The existence of the claim prevented Usio from “accepting the committed further funding” from its investors, the company insisted.

The collapse of Usio has prompted predictions that other small energy suppliers could also close before the end of the year.

Ofgem is reviewing its approach to supplier failure and its safety net. The regulator published revised guidance on the criteria it would consider when selecting a supplier of last resort back in 2016.

Since then there have been several instances of supplier failure that required Ofgem’s intervention. The first was in November 2016 when Co-op Energy took on 160,000 customers from GB Energy Supply when the small supplier went bust.

It was then used at the end of January 2018 when Green Star Energy was appointed to take on the 10,000 customers of failed supplier Future Energy.

This year has also seen the collapse of Iresa Energy – its 90,000 customers were transferred to Octopus Energy.

Octopus also rescued approximately 500 customers from Gen4U when the small-scale energy provided shut up shop.

Non-domestic provider National Gas and Power (NGP) had its supply licence revoked by Ofgem after the company was unable to pay debts of more than £200,000.

NGP’s 80 business customers were transferred to Hudson Energy. Green Star Energy is the domestic trading name of Hudson Energy.