Ofgem has proposed financial and customer service tests for new suppliers wishing to enter the energy market.
It has launched a consultation on its proposals until 23rd January 2019.
The Energy Ombudsman “wholeheartedly” welcomed the news.
Chief Executive Matthew Vickers said: “Small suppliers have brought innovation and competition to the energy market but there is a need for checks and balances to protect consumers.
“More than 40% of the complaints we now handle are about small suppliers, suggesting that a requirement on new market entrants to commit to meeting customer service and complaint-handling standards would benefit consumers.”
Lawrence Slade, Chief Executive of Energy UK added: “Given such a challenging financial situation in the retail market with the proposed price cap and rising wholesale prices, it is vital that Ofgem moves quickly moves quickly on the new financial and customer service tests for new entrants.
“With robust checks in place for suppliers entering the market, consumers will be protected from unsustainable business models and poor customer service. With over 70 suppliers operating in the market, it is important that consumers feel confident in switching and trust their supplier and continue to reap the benefits of the ever-increasing competition and innovation.”
Which? also believes it is a “positive step” moving forward.
Alex Neill, Managing Director of Home Products and Services said: “Customers deserve to get an excellent quality of service and more must be done to encourage improved standards across the board.
“Those unhappy with the service they are getting from their current energy provider should check our customers scores and consider switching to a better deal, as they could save around £400 a year.”
Martin Lewis, founder of MoneySavingExpert.com and Cheap Energy Club added the regulator does need a “better screening regime “on who is allowed to run a new energy firm.
He said: “The raft of small providers has actually risked damaging people’s confidence. They do a comparison and see a host of firms they’ve never heard of – which instantly makes people wary. Then they hear horror stories from the likes of Iresa and instead of scrolling down to find a supplier with decent service, they just give up.
“Encouraging competition is great but it has to be effective competition and people need a level of quality assurance.
“The end result should be when people ask if they can trust a small energy firm, they know that there is at least a minimum standard in effect in order for that supplier to have received the licence in the first place. Energy is a public good, we can’t play fast and loose with it.”