Ofgem, the energy industry regulator will be bringing in more rigorous checks for energy suppliers after a number of firms have gone into bankruptcy within the last two years alone.
A new set of proposals were outlined today that will thoroughly review providers for the home energy market. Previously, Ofgem has already put in place stricter regulations for new entrants to the sector.
Consumers are becoming increasingly concerned when selecting a provider that they haven’t heard of, and rightfully so. A number of independent suppliers, such as Brilliant Energy, Economy Energy, and Toto Energy have all gone into liquidation.
New checks are listed in the proposals for growing providers, these are a way to ensure that they are prepared to meet their financial obligations, in addition to providing gas and electricity to their new and existing customers.
Ofgem will even go as far as prohibiting firms from taking on new customers if they are unable to demonstrate this.
The energy watchdog also has plans to introduce new licensing requirements. These will help to minimise the cost and disruption to the market if a supplier goes bust. As an example, when administrators take over suppliers that have failed, they would have to provide similar consumer protections around debt collection practices to former customers as active suppliers, this causes a lot of headaches for customers and administrators alike.
Ofgem’s Executive Director of Consumers and Markets, Mary Starks, said: “Energy suppliers have been at the core of the industry response to the COVID-19 crisis, protecting customers and the energy supply of those most in need. Now more than ever we need to ensure that suppliers are set up in the right way to treat customers fairly and meet the challenges of today’s energy system.
“These proposals will drive up suppliers’ customer service standards and lead to greater resilience in the sector, whilst reducing the risk and costs to consumers associated with supplier failure.”
Chris Richards, Managing Director of Utility Saving Expert, welcomed these new proposals, saying: “Renewed competition in the sector helps customers obtain better deals and gives them access to improved customer service.
“Astonishingly, with more than 20 suppliers going bust in 2019, and the current challenges we all face due to the coronavirus pandemic. These new rules are a step in the right direction to protect customers by ensuring suppliers meet their obligations”.
Earlier in June, Ofgem launched a £350m fund to provide financial assistance to those smaller suppliers which cannot access government support as they do not have an investment-grade credit rating.
Those firms that are eligible for the programme will have the opportunity to defer payments to the operators of the UK’s gas and electricity networks until March 2021. These costs typically make up 20 per cent of consumer bills.