Britain’s energy regulator has launched new market reform proposals to enhance consumer protection and energy suppliers‘ resilience.

This package of ‘reforms’ includes the introduction of ‘capital adequacy requirements’, a measure that hopes to help reduce the risk and cost of supplier failures.

Energy companies must hold a minimum capital to withstand future market shocks.

Ofgem will also require energy companies to ringfence Renewable Obligation receipts and monitor the use of credit balances – this means that suppliers will have to ringfence the money needed to buy renewable energy and follow certain new rules on how they can use their customer balances.

The energy regulator seeks feedback on the proposals it hopes to publish in the spring of next year.

Jonathan Brearley, Ofgem’s Chief Executive, said: “The energy crisis has had a profound impact on the sector, its business models, our approach to its regulation and the way we think about risk.

“These proposals will provide protections, checks and balances for consumers, suppliers and the entire sector to create a more stable market. We want suppliers to be able to be innovative and dynamic, while also making sure they are financially stable and that customers’ money is protected.

“This is a delicate balance and while Ofgem want well-capitalised businesses that can weather price fluctuations, we also don’t want to block the market for new suppliers or force suppliers to sit on lots of capital they could be investing in innovative ideas.”

Gillian Cooper, Head of Energy Policy for Citizens Advice, said: “Ofgem must ensure people never again experience the chaos and cost of multiple suppliers going bust.    

“It’s essential that these proposals lead to concrete change that is felt by customers. The only way that will happen is if these new rules are enforced.

“Importantly, we can’t return to a world where customer credit balances can be misused to fund risky business models.”