Ofgem regulations

Ofgem has published its final proposals for new ongoing requirements for suppliers to drive up customer service standards, reduce the risk of supplier failure and strengthen the safety net for consumers if a supplier goes out of business.

According to Ofgem, the more competitive market has delivered significant benefits for consumers in the form of more innovative products and lower prices. However, as in any competitive market, some suppliers may fail to keep pace with more competitive firms.

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With additional demands placed on suppliers by the COVID-19 crisis, it is now more important than ever that suppliers are resilient, treat their customers fairly and are able to continue supporting those who need it.

Mary Starks, 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.

“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 Starks.

Ofgem’s statutory consultation includes checks for growing suppliers that they are prepared to meet their financial obligations and they are able to effectively serve their customer base. If they do not demonstrate this, Ofgem could stop them from taking further customers on.

Ofgem also plans to introduce new licence requirements in the event of supplier failure to minimise the cost and disruption to the wider market. 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.

Suppliers would also be required to have plans in place to minimise the cost that is mutualised across other suppliers in the event that they fail. Ofgem will explore whether prescriptive requirements for this could also be appropriate.

The rules set out in the statutory consultation are expected to come into force this winter. They will build on the new entry requirements for new suppliers that came into force in 2019, raising standards across the retail energy market.

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