Ofgem supplier licensing tests to start in June

From June onwards, any new businesses wishing to start an energy supply company will have to pass some stringent tests in order to be allowed to supply the UK market.

Ofgem’s new supplier licensing tests aim to reduce the risk of supplier failure and ensure a better customer experience.

New gas and electricity license applications will be subjected to tests on their finances as well as their customer service standards. They will also be expected to show how they plan to meet the UK’s regulatory and market obligations.

Mary Starks, executive director of consumers and markets at Ofgem, said in a statement :

“In an ever-evolving market, Ofgem’s objective is to protect consumers while also ensuring they enjoy the benefits of increased competition and innovation that successful new firms entering the market bring.

“Applying new requirements on suppliers entering and operating in the market will aid us to weed out those that are underprepared, under-resourced and unfit. This will help minimise the risk of supplier failure and help drive up standards for consumers.

“We will adopt a proportionate, risk-based approach to licensing suppliers and will continue to encourage competition and innovation, including innovative business models, which benefits consumers.”

As well as launching tests for new suppliers, Ofgem plan to begin consultations on requirements for current suppliers too. This consultation is earmarked for launch in the summer.

Currently, it’s very easy to discover how to set up an energy supply company . We, ourselves, supply ready licensed off-the-shelf businesses, and help our customers gain their gas and electricity supply license to operate. As such, a handful of unsustainable businesses have been created which were not built to stand the test of time and couldn’t handle the challenging market conditions we are currently experiencing.

Brilliant Energy were the third supplier of 2019 to collapse, ceasing trading on March 11th. Previously both Our Power and Economy Energy had folded since the start of the new year too. These latest supplier failures top a year of record company collapses, with more than a dozen firms going bust in 2018.

However, from the 1st June, it will be more challenging for those who have not done the right preparation to get their electricity and gas supply license from Ofgem. This will mean a better marketplace, with fairer pricing from companies who are as keen to be sustainable as they are to gain new customers.

 All of the new licensing requirements are aimed an ensuring a company is ‘fit and proper’ to operate in the UK energy market. The key areas being tested are:

• Finances : Firstly, the business will have to demonstrate that they are in a healthy financial state. This will mean showing that they have the funding to run the business for a year.
• Compliance : With a growing list of obligations and regulations to adhere to, new entrants to the UK supply market must show that they understand these requirements and demonstrate how they intend to meet them.
• Customer service : Applicants will be expected to demonstrate intentions to provide a proper level of customer service. How this will be measured is unclear, but it’s unlikely that purely web-based services would be excluded as a result.
• Fitness of management : Directors and shareholders will also be expected to show they are ‘fit and proper’ to hold a license. This will probably involve background checks to eliminate unsuitable applicants.

The complete details of the final proposals which are planned to be introduced from June are available on the Ofgem website.

Dyball Associates are proud to help new supply businesses successfully launch in the UK market.

Through our energy market consultancy services, and the software we've developed, we're supporting new UK electricity and gas suppliers get set up and start supplying.

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