Ofgem confirms rigorous tests for new entrant energy suppliers

The news comes after a wave of supplier failures over the last 18 months, many of whom had very poor customer service

The Big Zero report

New energy suppliers entering the market will have to undergo stringent tests under new plans unveiled by Ofgem.

The new rules will come into force in June and energy providers will have to prove they have sufficient funding 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, major shareholders and senior managers will also have to show they are “fit and proper” to hold the licence.

The regulator said: “Any prudent, well-prepared entrant should be able to demonstrate to us at the point of licensing that they have planned their financial and operational resources for entry into the supply market and that they are prepared to meet the costs they will face (for example, under government/environmental obligations and other industry costs).

“Applicants will also need to provide a ‘statement of intent’ regarding compliance with their licence obligations, with particular regard to customer service. Finally, we are enhancing our assessment of entrants’ suitability to hold a supply licence through new ‘fit and proper disclosure requirements.”

The news comes after a wave of supplier failures over the last 18 months, many of whom had very poor customer service.

Ofgem also intends to consult on new proposals in the summer, aiming to raise standards of existing suppliers, including new reporting requirements and rules around how they manage customer credit balances.

Mary Starks, Executive Director of Consumer and Markets said: “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.”

The regulator has also published new Applications Regulations, including updated applications forms and fees and a new application guidance document – it is consulting on the proposals until 13th May 2019, following which it intends to enforce the new rules in June.

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