Ofgem to tighten up checks for new entrant energy suppliers

It has launched a review into its supplier licensing regime to ensure “appropriate protections” are in place against poor customer service and financial instability

By Priyanka Shrestha

Ofgem is looking at making it harder for new energy suppliers to enter the market.

It has launched a review into its supplier licensing regime to ensure “appropriate protections” are in place against poor customer service and financial instability.

The regulator has outlined the scope and objectives of its review, which will consider potential reforms to the current licensing arrangements for supply market entry as well as exit and ongoing operation and monitoring.

The announcement comes after Ofgem banned small supplier Iresa from taking on new household customers because of its failure to deliver good customer service.

Two other small suppliers also collapsed over the last two years, which led to the regulator appointing other companies to take on their customers.

The number of domestic suppliers has risen from 27 in December 2014 to 66 last September.

Under the review, Ofgem will look at whether there should be any additional requirements relating to the financial health of prospective suppliers and the need for additional ongoing checks during a supplier’s operation in the market.

Interim Director of Future Retail Markets Philippa Pickford said: “Customers have benefitted from the competitive pressure caused by new suppliers entering the energy market, helping to deliver more competitive pricing and drive service quality up.

“However, we recognise that low entry barriers and more participants active in the market could increase the likelihood of companies entering the market who are not meeting expectations with respect to customer service and of supplier failure.”