Ofgem proposes tougher regulation for energy suppliers

Energy regulator opens consultation on new checks to protect both business and domestic customers. Energy costs can be a significant burden for charities, and facilities managers can spent a lot of time trying to find the best gas and electricity tariffs.

Lighting up time in London. As winter looms, charity facilities managers are thinking about energy costs. (Photo: Robert Pittman, CC BY-NC-SA 2.0 via Flickr)

By Annette McGill

The energy regulator Ofgem says energy suppliers could be forced to submit to financial audits under new proposals designed to better regulate the energy market.  

Ofgem has opened a consultation on new regulations for energy suppliers. The proposals come in the wake of years upheavals in the supplier market. The market has grown from 12 suppliers in 2010, to 70 providers last year. But 15 suppliers have gone bust in the last 18 months.  

More failures to come?

Last month Ofgem warned a further four suppliers that they could have their licenses revoked if they don’t pay money they owe to the government for their Renewables Obligations (RO). All UK energy suppliers  must comply with the RO scheme, which records the amount of energy they get from renewable sources. Companies buying renwable power get certificates, if they don’t get enough certificates, they must make up the shortfall. 

The four suppliers – Delta Gas and Power, Gnergy, Robin Hood Energy and Toto Energy – together owe  £14.7 million in outstanding payments under the RO scheme.

Independent audits

Last summer the Ofgem introduced measures to control the supplier market. Now it is proposing extra regulations. Ofgem wants to be able to request independent audits of suppliers’ financial status and customer service operations.

It also wants to introduce ‘fit and proper’ requirements for suppliers, to ensure those in senior management positions are fit to carry out their duties.

In addition, small suppliers would face new checks to ensure they have the operational capability to effectively serve their customers. If they fail the checks, they would be stopped from taking on further customers on. 

The regulator says the proposed reforms would drive up customer service standards, reduce the risk of supplier failure and strengthen the safety net.

The energy industry body, Energy UK, last week showed that some  603,400 customers - both domestic and business - moved to a new electricity supplier during September 2019 - 10% up on last year. This brings the number of electricity switches in 2019 to 4,741,454. 

The consultation is open for responses until 3 December 2019.