Regulator intervenes

Ofgem rules aim to stop energy suppliers failing

Ofgem wants to ensure firms do not fail

Measures to reduce the risk of energy suppliers going bust and protect consumers’ money have been unveiled by the regulator.

Ofgem says its proposals should ensure that energy suppliers can withstand future shocks following a number of failures in the past year.

It will also stop energy suppliers using customers’ money “like an interest-free company credit card”. 

The recommendations include making sure companies have enough working capital and strengthening the direct debt rules.

More than 30 energy suppliers have failed since the beginning of last year as a result of sharp increase in wholesale energy costs which left them losing money from customers who were locked into lower cost deals.

Jonathan Brearley, CEO of Ofgem, said: “Today’s plans are another step in making sure the complex energy market is  fair, resilient and works for everyone.

“The energy market remains incredibly volatile and there are a number of huge geopolitical issues continuing to apply massive pressure. Ofgem is working hard to ensure energy suppliers shore up their positions so they can weather the ongoing storm.

“By ensuring that suppliers are operating well-financed, sustainable, and have more resilient business models, we can avoid the supplier failures we saw last year which caused huge stress and worry and added costs to everyone’s bills.

“But if some do still fail, consumer credit balances and green levy/renewables payments will be protected. Currently they are used by some suppliers like an interest free company credit card.

“Moving forward, all suppliers will have to have enough working capital to run, without putting their customers’ credit balances at risk. Today’s proposals will make sure that customers’ hard-earned money is properly protected so that a company must foot the bill if it fails, rather than consumers picking up the tab.”

Ofgem has said the changes will reduce the risk of suppliers going bust and protect the credit balances of energy customers if they do.”

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