Thursday 25 June 2020 2:29 pm

Ofgem to bring in new checks on energy suppliers

The UK’s energy watchdog will put in place more stringent checks on the country’s energy suppliers after a spate of collapses over the last two years.

Ofgem today laid out a new set of proposals to increase scrutiny on the domestic market, having already set out tougher regulations for new entrants to the sector.

Read more: Ofgem unveils £350m scheme to support struggling energy suppliers

A number of independent suppliers, such as Toto Energy, Solarplicity, and Brilliant Energy, have all gone bust recently, leading to heightened concerns around consumer protections.

The proposals include checks for growing suppliers that they are prepared to meet their financial obligations and able to effectively serve their customer base. 

If they do not demonstrate this, Ofgem will be able to prevent them from taking more customers on.

Ofgem also plans to introduce new licence requirements to minimise the cost and disruption to the market if a supplier fails. 

For example, when administrators take over failed suppliers, they would have to provide similar consumer protections around debt collection practices to former customers as active suppliers.

Mary Starks, Ofgem’s executive director of consumers and markets, 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.

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“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.”

Richard Neudegg, head of regulation at Uswitch, welcomed the proposals, saying: “Competition from new providers has been a really important part of getting consumers access to strong pricing and good customer service.

“But with a record 24 energy firms going bust in 2019, and the upheaval due to Covid-19, it is right to ensure the rules for suppliers are robust enough”.

Earlier this month the regulator launched a £350m fund to provide financial assistance to those smaller suppliers which cannot access government support due to their lack of a investment-grade credit rating.

Read more: Ofgem cracks down on five smart meter operators

Those firms eligible for the programme will be able to defer payments to the operators of the UK’s electricity and gas networks until March 2021.

Such costs usually make up 20 per cent of consumer bills.