Ofgem introduces new tougher entry tests for energy suppliers
Companies applying for a licence to supply energy will have to undergo more stringent tests from June in order to help drive up standards for customers and reduce the risk of supplier failure.
- New tests for energy suppliers entering the market will be rolled out from June this year
- Applicants will have to demonstrate sufficient funding, provide a customer service plan and pass a fit and proper test
- Ofgem will be launching a consultation on ongoing requirements for suppliers currently in the market in the summer
Applicants will need to demonstrate they can adequately fund their operations for their first year, outline how they expect to comply with key regulatory and market obligations, and show their intentions to provide a proper level of customer service.
Directors and major shareholders of companies applying for a licence, as well as senior managers, will also have to show they are ‘fit and proper’ to hold a licence.
Ofgem will consult on new proposals in the summer with the aim of raising standards of existing suppliers. This will include considering new reporting requirements for suppliers who are already active in the market and rules around how suppliers manage customer credit balances. Ofgem will also review the arrangements for suppliers exiting the market.
Over the last decade more consumers have benefited from competition in the energy market, which has driven down energy prices, helped to raise customer service standards and provided more choice.
However, in the last 18 months, a number of suppliers have failed many of whom provided a poor level of customer service.
Following these supplier failures, Ofgem’s ‘safety net’ has protected domestic customers’ credit balances and ensured all customers’ energy supply continues. Ofgem acknowledges that customers can still experience inconvenience and worry if their supplier fails.
Strengthening entry and ongoing requirements on suppliers will help to drive up customer service standards and reduce the risk of disorderly supplier exits.
Ofgem aims to minimise the impact, including the cost, that a supplier failure has on consumers and the wider market.
Mary Starks, executive director of consumers and markets at Ofgem, said:
“In an ever-evolving market, Ofgem’s objective is to protect consumers while also ensuring they enjoy the benefits of increased competition and innovation that successful new firms entering the market bring.
“Applying new requirements on suppliers entering and operating in the market will aid us to weed out those that are underprepared, under-resourced and unfit. This will help minimise the risk of supplier failure and help drive up standards for consumers.
“We will adopt a proportionate, risk-based approach to licensing suppliers and will continue to encourage competition and innovation, including innovative business models, which benefits consumers.”
Notes to editors
- Supplier Licensing Review: Final proposals on new entry requirements has been published today
- The consultation on new draft statutory instruments, application regulations, application forms and guidance document has been published today.
For media, contact
Michelle Amos: 020 7901 1881
Media out of hours mobile: 07766 511470 (media calls only)
General enquiries (non-media)
If you are an energy customer looking for help and advice, including complaints about energy firms, please see our Household gas and electricity guide. Citizens Advice also provide a free, impartial helpline service across a range of issues on 03454 040506.
If you have an enquiry or complaint relating to Ofgem’s policies or functions, contact us at firstname.lastname@example.org or on 020 7901 7295.
For all other non-media related enquiries, please visit our Contact us page.
Ofgem is the independent energy regulator for Great Britain. Its priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating networks.
For energy insights and updates straight to your inbox from Ofgem, please subscribe.
Latest News from
SSE pays £700,000 after missing gas smart meter target03/04/2019 13:15:00
SSE Energy Services, the domestic retail business of SSE, is to pay out £700,000 after it missed its target to install gas smart meters for customers in 2018.
Ofgem approves Shetland link and would support alternative Western Isles link proposal that provides better value for money for consumers20/03/2019 10:15:00
Ofgem is minded to approve a proposal by Scottish and Southern Energy Networks (SSEN) to build a 600MW subsea electricity transmission link from Shetland to mainland Scotland.
Ofgem appoints SSE to take on customers of Brilliant Energy15/03/2019 15:15:15
Ofgem has appointed SSE to take on supplying Brilliant Energy’s 17,000 domestic customers. This follows a competitive process run by Ofgem to get the best deal possible for customers.
Ofgem protects customers of failed supplier Brilliant Energy12/03/2019 15:15:15
Brilliant Energy Supply Limited, an energy supplier with about 17,000 domestic customers, has ceased to trade.
Ofgem orders Avro Energy to become a DCC user11/03/2019 10:15:15
Ofgem is consulting on issuing Avro Energy with a final order due to it being in breach of the requirement to become a Data Communications Company (DCC) user.
SSE pays out £705,000 over Feed-in Tariff misreporting28/02/2019 12:15:00
SSE will pay over £705,000 to the FIT levelisation fund and in redress after overstating to Ofgem the costs it incurred through making FIT payments to eligible low carbon generators.
Ofgem orders Solarplicity to make significant customer service improvements25/02/2019 10:25:00
Ofgem has issued a provisional order on Solarplicity, banning the energy supplier from taking on new customers and increasing vulnerable customers’ direct debits, due to its poor switching process and customer service.
Ofgem proposes final order to URE Energy for non-payment of Renewable Obligation14/02/2019 10:15:00
Ofgem is consulting on issuing URE Energy with a final order for being in breach of the Renewables Obligation Order 2015.
Higher wholesale costs push up default and pre-payment price caps from April07/02/2019 12:15:00
The price cap for customers on default (including standard variable) tariffs, introduced on 1 January 2019, will increase by £117 to £1,254 per year, from 1 April for the six-month “summer” price cap period. The price cap for pre-payment meter customers will increase by £106 to £1,242 per year for the same period.