Ofgem (the Office of Gas and Electricity Markets) said Octopus, which specialises in sustainable household gas and electric, had been chosen after a “competitive process” to get the best deal for Avro’s clients.
The move will allow Octopus to recoup all costs incurred, including buying energy for customers of the failed supplier via an industry levy that ultimately falls on consumer bills.
Households transferred to Octopus will also be protected by the energy price cap, the regulator announced.
There is currently a difference of more than £500 between how much Octopus would be allowed to charge under the UK’s annual price cap, which rises to £1,277 from October, and the near £1,800 cost of buying energy for new customers at present wholesale prices, according to analysis by the Financial Times.
Ofgem said supplies to Avro customers will continue as normal when they are switched to Octopus – and that all those affected will be contacted in the coming days.
It advised those wanting to “shop around” for a better quote to wait until the transfer to Octopus has been completed before switching, adding customers who choose to switch will not be charged an exit fee.
Gillian Cooper, head of energy policy for Citizens Advice, said having a new supplier “should remove some uncertainty” for Avro’s customers.
“Their credit balances will be carried over and their new supplier, Octopus Energy, will let them know what their new tariff will be,” she told Press Association.
“Anyone struggling to pay their bills must be supported and Octopus Energy must make sure that any debt repayment plans Avro Energy customers may have been on before are continued.”
Ms Cooper emphasised that certain pensioners and those on low incomes who were eligible for the government’s warm home discount under their Avro tariff must continue to receive it with their new supplier.
She said: “It’s up to the government and Ofgem to work with suppliers to ensure this happens.”
It comes after the government brushed aside claims it was considering paying large suppliers to take on the customers left behind by the collapse of smaller rivals amid ongoing chaos in the sector.
Currently, ministers are relying on an existing Ofgem process in which energy groups bid to become a “supplier of last resort” when a rival goes out of business – like Octopus did for Avro.
The measure is favoured by suppliers who are performing well because it allows them to grow their customer base – significantly, in some cases.