Ofgem proposes reforms to protect customers and strengthen energy suppliers
It comes days after the regulator told 17 British energy suppliers they have to improve how they deal with vulnerable customers.
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Your support makes all the difference.Energy regulator Ofgem has proposed reforms designed to protect customers and ensure energy suppliers are resilient to market shocks.
It comes days after it told 17 British energy suppliers they have to improve how they deal with vulnerable customers, with the watchdog identifying “severe weaknesses” at five firms.
A raft of energy suppliers have collapsed since the start of last year after being unable to cope with soaring energy prices.
The Government is facing a roughly £6.5 billion bill for the collapse of supplier Bulb alone.
The regulator said on Friday the fresh proposals include introducing capital requirements to ensure suppliers have enough cash to deal with future energy shocks.
It said it will also require suppliers to ring-fence money they need to buy renewable energy and more closely monitor the use of customers’ credit balances to stamp out misuse by firms.
Ofgem said it is seeking feedback on the plans and hopes to publish the reforms in the spring.
Chief executive Jonathan Brearley said: “The energy crisis has had a profound impact on the sector, its business models, our approach to its regulation and the way we think about risk.
“These proposals will provide protections, checks and balances for consumers, suppliers and the entire sector to create a more stable market.
“We want suppliers to be able to be innovative and dynamic, while also making sure they are financially stable and that customers’ money is protected.
“Ultimately, we have a responsibility as a sector to ensure we are protecting consumers’ interests by making sure our financial regulations are as robust as they can be.
“At a time of extremely high energy bills, that responsibility is more important than ever.”
However, British Gas owner Centrica said the proposals did not go far enough after previously arguing that customer credit should be ringfenced to prevent suppliers from using consumers’ money for other corporate purposes.
Chris O’Shea, chief executive of Centrica, said: “When customers pay up front for their energy, they are trusting their supplier to look after their hard-earned money.
“They would be appalled to learn their money was being used to fund day-to-day business activities, but that’s exactly what’s happening in some companies, and it undermines confidence in the market.
“We identified this as a major risk to consumers in 2016 – years before the energy crisis – and Ofgem promised to fix this.
“This feels like an abdication of responsibility by a regulator not focusing on the right things.”