Suppliers fund the scheme but pay for it in arrears – sometimes leaving a shortfall. Due to challenging trading conditions over the last few years, several suppliers have gone out of business.
These suppliers failed to meet their share of the RO, and so left a shortfall in funds above a certain amount known as the Mutualisation Threshold. To cover the deficit, the energy regulator, Ofgem, divided this cost across all participating suppliers.
Mutualisation could still occur in the future if a supplier fails. However, Ofgem now requires suppliers to ringfence RO funds on a quarterly basis. This makes the likelihood and impact of a mutualisation event much smaller. Find out more here.
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