Ofgem has proposed introducing a new series of checks and tests to improve customer service and reduce the risk of supplier failure.
The reforms would see existing suppliers required to demonstrate to Ofgem they are able to serve additional customers effectively and meet industry obligations whilst remaining financially viable.
Ofgem suggests new suppliers entering the market have brought competition and innovation but notes some have failed fail to keep up with the pace of more competitive firms and have subsequently gone out of business.
The regulator wants to avoid this happening and ensure customers and the market are protected if it does occur.
The new rules would let Ofgem request independent audits of suppliers’ customer service records and financial status, as well as new checks to be introduced for growing suppliers before they hit certain thresholds of customer numbers – if they fail they will not be allowed to sign more customers up.
Ofgem also proposes introducing further ‘fit and proper’ requirements for suppliers, to ensure those in senior management positions are fit to carry out their duties and to make sure suppliers would be able to make an ‘orderly exit’ from the market if they went out of business.
Mary Starks, Executive Director of Consumers and Markets at Ofgem, said: “The new proposals will create more accountability in the market, require more responsible and appropriate behaviour from suppliers in the market and reduce the risk and costs to consumers associated with supplier failure.
“In the event a supplier fails, the changes will also strengthen the ‘safety net’ and improve the experience of customers when they are transferred, so that consumers can be reassured that whatever happens they will be properly protected.”