Blog Post

Ofgem to introduce new standards for smaller energy suppliers this winter

Richard Simmonds • Jun 26, 2020

Ofgem has unveiled new standards for energy suppliers to reduce the number that fail and to improve the services provided to consumers.

Financial checks

The energy regulator announced that new checks will be made on challenger energy suppliers to ensure that they can meet their financial obligations and are able to effectively meet the requirements of their customers.

There have been calls for tougher standards in recent years following the collapse of several smaller suppliers, which some have blamed on the introduction of the price cap in 2019.

The number of failed companies raised questions over the viability of the 50 or so independent energy suppliers in the market today. These challenger suppliers have gradually been taking a larger market share from the bigger companies.

The new checks will see the regulator check a supplier’s finances and failure to demonstrate that they are financially viable could result in Ofgem banning them from taking on any more customers.

To avoid being penalised energy suppliers will have to demonstrate their readiness for growth and their ability to meet regulatory obligations, which will help them continue supporting consumers.

New Licence Requirements

Ofgem is also planning to introduce new licence requirements that in the event of a supplier going bust would minimise the disruption and costs to the wider market.


One of the methods suggested is that suppliers will have to have plans in place to reduce the costs that are mutualised across other suppliers in the event that they fail.


Another is that when administrators take over a failed supplier, they will have to provide similar consumer protections around debt collecting to former customers as still active suppliers.


“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,” said Mary Starks, Ofgem’s Executive Director of Consumers and Markets.


These new licence requirements come after Ofgem set out tougher rules for new market entrants last year.

According to Ofgem, the new rules will come into force this winter with a consultation open until August 20.  

Further Reading

How does the UK Energy Market work Part 1 – Energy Prices and entering the energy market


How does the UK Energy Market work Part 2 – Tariffs and Energy Billing


Digital Only Energy Supplier announced by Centrica


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.

 

For more information on how to start and manage an energy company, get in touch with Dyball Associates today.


More articles

Latest News

White label

What is Supplier White Labelling and why it might be good for your business

By Richard Simmonds • 24 Nov, 2021
We take a look at white labelling and why it could be a good source of revenue for your business.
dim bulb

Lights out for Bulb, 1.7 million customers affected

By Richard Simmonds • 23 Nov, 2021
The ongoing energy crisis has claimed its biggest victim as the UK’s seventh largest energy supplier, Bulb announced that it has entered administration.
investigate

British Gas and Eon could be investigated by Ofgem for breaching price cap rules

By Richard Simmonds • 22 Nov, 2021
Two of the UK’s largest energy supply companies could be investigated by Ofgem and possibly face fines of up to 10% of their revenue after being accused of breaching price cap rules by overcharging customers by hundreds of pounds.
More Posts
Share by: