Ofgem vows to crack down on energy suppliers following increasing scrutiny of its own performance
Earlier this week, Ofgem sent a letter to all UK energy suppliers warning them that it will be working with fraud authorities and the police if it suspects companies and their managers have carried out actions that lead to the deterioration of a supplier’s finances.
What was in the letter?
The stern letter from Ofgem’s head of retail, Neil Lawrence was sent the day before three more small suppliers exited the market and reminded energy suppliers of their responsibilities to minimise any costs that could end up spreading across the wider energy market and lead to higher energy bills for consumers.
“Where appropriate, we will work with other public bodies, including the insolvency department, police or process fraud, to address this behaviour,” said Lawrence, referring to the UK’s Fraud and Cybercrime Reporting Centre.
Since August, ten energy suppliers have gone bust as a result of soaring wholesale energy prices and payment deadlines for renewables obligations.
The crisis has resulted in Ofgem itself coming under intense scrutiny in recent weeks as many blame it for not doing enough to ensure that suppliers were financially secure and assisted. Others in the industry accuse the regulator of dropping the ball and accused it of not doing enough to prevent the current crisis.
Some analysts have warned that the way the energy supply market is regulated would always eventually lead to disaster due to several suppliers having weak business models, poor finances and inadequate hedging strategies.
As well as the letter, suppliers received a 12-point questionnaire that indicates the regulator is stepping up its oversight of the industry.
The questions include ones aimed at discovering how financially viable suppliers are and what actions they are taking to reduce the impacts on consumers.
“Our number one priority is customer protection, and with companies out of the market, it is right that we remind suppliers as regulators of their legal obligations and avoid unnecessary additional costs to the sector and ultimately consumers. We are ready to take action in the event that suppliers fail to comply,” said Ofgem when asked about the letters by the Financial Times.
Also read: Wholesale Energy Prices, Bad Debt and the Price Cap are proving detrimental to Energy Suppliers
Deepening Crisis
The crisis in the energy supply market worsened on Wednesday as three more energy suppliers declared that they were exiting the market.
Igloo had 179,000 customers, Symbio 48,000 and Enstroga 6000.
Wholesale energy prices continue to climb and suppliers are finding it tough to make any revenue.
Currently, the energy price cap has created a difference of more than £500 between the amount suppliers are allowed to charge and the cost of purchasing power which is hovering around the £1,800 mark. The price cap is set to rise to £1,277 from October 1st but it’s still not enough.
Anger at the price cap and Ofgem itself is only set to grow and calls have been made to scrap green levies that impose significant financial pressure on suppliers.
Also read: Get rid of green levies to support energy suppliers and cut energy bills says E.on boss
Further Reading
Igloo Energy, Symbio and ENSTROGA exit the market
What has caused the Energy Market Crisis and what does it mean for the energy retail market?
Wholesale gas prices hit another record high adding to energy market concerns
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 to 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.
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