title: "Gas Supply Licence" type: wiki created: 2026-04-12 updated: 2026-04-12 tags: [gas, supply, licence, tariff-cap, vulnerable-customers, prepayment, switching, financial-resilience, solr] primary_source: /sources/ofgem/licences/gas-supply-slc.md

Gas Supply Licence

What it is

A Gas Supply Licence is required by any company that supplies gas to premises through pipes in Great Britain. The legal requirement comes from section 7A(1) of the Gas Act 1986. Ofgem (formally the Gas and Electricity Markets Authority) grants and regulates the licence.

Every energy company billing domestic or business customers for gas holds one: British Gas, OVO, EDF, Octopus, E.ON, Scottish Power, Utilita, and all other active suppliers. At April 2026 there are approximately 30 active licensees.

The standard conditions are consolidated into a single document (441 pages, consolidated to 1 August 2025) and apply identically to all licensees unless Ofgem issues a specific derogation or direction.

Gas supply vs gas shipping

The Gas Act 1986 creates two legally distinct licence categories:

Most large suppliers hold both licences and run them together. The licences are legally separate: retail obligations under the supply licence do not merge with network obligations under the shipper licence.

Structure of the licence conditions

Three sections:

• Section A (conditions 0-21BA): Applies to all suppliers regardless of customer type. Covers standards of conduct, financial resilience, information obligations, Retail Energy Code compliance, switching, last resort supply.
• Section B (conditions 22-32A): Applies to domestic suppliers. Covers tariff regulation, tariff cap, customer protection, prepayment meters, Priority Services Register, billing, and engagement obligations.
• Section C (conditions 33-50): Applies to all suppliers with domestic or micro business customers. Covers the smart metering rollout, In-Home Displays, the Smart Energy Code, and DCC enrolment.

Key customer protection conditions

Condition 0 - Treating Customers Fairly: The overarching conduct standard. Suppliers and their representatives must act fairly, honestly, and transparently; provide complete and accurate information in plain language; make it easy for customers to contact them; and identify and accommodate customers in a Vulnerable Situation. A customer is in a "Vulnerable Situation" where their personal circumstances make them significantly less able to protect their interests or significantly more likely to suffer detriment.

Condition 26 - Priority Services Register (PSR): Suppliers must maintain a PSR of customers who may need extra support. They must actively seek to identify eligible customers, offer registration during all interactions where eligibility is apparent, and provide Priority Services (free meter reads, accessible communications, third-party contacts, prepayment meter safety checks) free of charge. PSR data must be shared with gas transporters through the UNC mechanism.

Condition 27 - Ability to pay and disconnections: Suppliers must make proactive contact with customers who have missed two consecutive monthly payments or one quarterly payment. They must offer payment plans calibrated to actual ability to pay, refer customers to debt advice services, and cannot disconnect a domestic customer in Winter if they are of Pensionable Age and live alone or with persons under 18. The detailed ability-to-pay assessment framework (SLC 27.8A) covers credit management policies, proactive outreach, repayment rate setting, and ongoing monitoring.

Conditions 27A and 28 - Prepayment meter protections: Suppliers must offer Emergency Credit and Friendly-hours Credit to all PPM customers when their credit runs low. Additional Support Credit must be offered to customers in a Vulnerable Situation who self-disconnect or self-ration. Involuntary prepayment meter installation is heavily restricted: the Debt Trigger must be met, multiple engagement attempts made, payment difficulty obligations satisfied, a Site Welfare Visit (with body cameras) carried out, and the meter assessed as safe and reasonably practicable. Warrant costs are capped at GBP 150 per premises per 12-month period.

Condition 21BA - Backbilling: Suppliers cannot bill a domestic or micro business customer for gas consumed more than 12 months before the bill is issued where the supplier is responsible for the delay.

Tariff cap via licence

Condition 28AD implements the Domestic Gas and Electricity (Tariff Cap) Act 2018. It applies to domestic customers on default (evergreen) contracts. Fixed-term contracts are generally exempt.

The cap is a Relevant Maximum Charge - a quarterly ceiling on the aggregate charges a supplier can levy per customer, expressed as a formula:

ChargeMax = WC + NC + PC + AA + OC + PA + E + H + L

The components: - WC - Wholesale Cost Allowance: reflects forward gas market prices - NC - Network Cost Allowance: transmission and distribution charges, varying across 14 Charge Restriction Regions (the DNO distribution zones) - PC - Policy Cost Allowance: cost of environmental and social schemes including WHD - AA - Adjustment Allowance: adjustments to the default cap methodology - OC - Operating Cost Allowance: efficient supplier operating costs, CPIH-indexed from baseline - PA - Payment Method Adjustment: cost differential between payment methods - E - EBIT Allowance: return on capital - H - Headroom Allowance: ensures competitive tariffs can be offered below the cap - L - Levelisation Allowance: equalises costs across payment methods

The Benchmark Annual Consumption Level for gas is 12,000 kWh. Ofgem publishes updated Benchmark Maximum Charges at least 25 working days before each quarterly period. Charge Restriction Periods run: Jan-Mar, Apr-Jun, Jul-Sep, Oct-Dec.

The condition came into force on 1 January 2019 and continues until a date specified by the Secretary of State under the 2018 Act.

Financial resilience reforms (post-2021)

The 2021-2022 energy crisis saw 30+ suppliers fail, triggering approximately GBP 3 billion in mutualised costs passed to remaining suppliers and ultimately consumers. The licence was substantially reformed:

Condition 4B - Financial responsibility principle (fully operational from 31 March 2025):

• Capital Floor: Adjusted Net Assets must not fall below GBP 0 per domestic customer. Breach requires immediate notification to Ofgem.
• Capital Target: Where Adjusted Net Assets are below GBP 57.50 per domestic customer (the "Intermediate Position"), the supplier must notify Ofgem within 7 days and seek approval before any non-essential payments.
• Annual Adequacy Self-Assessment: Submitted at least annually, signed by the Chief Financial Officer, covering the previous and next 12 months.
• Capitalisation Plan: Suppliers in the Intermediate Position must submit a credible plan to recover to above the Capital Target. Ofgem approves or rejects the plan.

Condition 4D - Ringfencing customer credit balances:

On Ofgem direction, suppliers must ringfence customer overpayments (the Protected Amount) using a Standby Letter of Credit, First Demand Guarantee, or Cash in a Credit Balance Trust Account. The Credit Balance Trust Account is a segregated account held on trust for customers and any appointed Supplier of Last Resort - the supplier cannot use it for operations.

The direction trigger: Cash falls below 20% of Domestic Customer Credit Balances (Cash Coverage Trigger), or Adjusted Net Assets are below the Capital Target (Capital Target Trigger).

Supplier of Last Resort

When a gas supplier fails, Ofgem appoints a Supplier of Last Resort (SoLR) to take on the failed supplier's customers. Conditions 8 and 9 require every supplier to comply with a Last Resort Supply Direction and to cooperate fully with the SoLR transfer process. The SoLR can claim a Last Resort Supply Payment from Ofgem to cover the cost of taking on customers at short notice. Mutualised costs from supplier failures are ultimately socialised across all suppliers through industry codes, and through policy cost pass-throughs in subsequent tariff cap periods.

Relationship to the Gas Shipper Licence and UNC

The Gas Supply Licence imposes retail obligations but does not directly govern the supplier's network activities. Those are governed by the Gas Shipper Licence SLCs and by the Uniform Network Code (UNC), to which the shipper is party. The supply licence connects to these through:

• SLC 18: Suppliers must provide undertakings to gas transporters consistent with the shipper role (for example, credit cover arrangements).
• SLC 26 (PSR): Priority Services Register data sharing operates through the UNC mechanism, meaning the transporter knows which customers are vulnerable at each supply point.
• SLC 17: Mandatory data exchange with industry participants operates through the REC and UNC data flows.

A domestic customer switching supplier triggers both the supply licence switching process (via the REC) and the UNC shipper transfer process. The two run in parallel and are coordinated through the industry registration system.

Mirror with Electricity Supply Licence

The Gas Supply Licence SLCs are structurally near-identical to the Electricity Supply Licence SLCs. Conditions 0 to 32A share the same numbering and near-identical text, with gas-specific substitutions. Section C smart metering conditions (33-50) are shared entirely. Ofgem modifies both licences in parallel.

The key gas-specific differences: SLC 29 covers gas safety obligations; SLC 18 refers to gas transporters rather than distribution network operators; SLC 20 covers gas safety information and the Meter Point Reference Number. The tariff cap mechanism (SLC 28AD) operates identically in structure across both licences, with the gas Benchmark Annual Consumption Level set at 12,000 kWh.