Ofgem introduces new financial shock measures

The move is designed to prevent the kind of energy supplier failures seen last year, as well as better protect consumers’ money if they do fail. 

These new rules will also protect consumer credit balances and green levies when suppliers fail, to prevent the costs from being picked up by consumers, and introduce requirements for suppliers to have better control over the key assets they need to run their supply business. 

There will also be a tightening of the rules on the level of direct debits suppliers can charge customers, to ensure credit balances do not become excessive. 

Since September 2021, 28 suppliers have failed - with customers of these businesses being transferred to new energy providers under Ofgem’s supplier of last resort system. The cost of this to the new suppliers was £94 per household.

Commenting on the changes, Ofgem’s chief executive Jonathan Brearley said: “The energy market remains incredibly volatile and there are a number of huge geopolitical issues continuing to apply massive pressure. 

“Ofgem is working hard to ensure energy suppliers shore up their positions so they can weather the ongoing storm. By ensuring that suppliers are operating well-financed, sustainable, and have more resilient business models, we can avoid the supplier failures we saw last year which caused huge stress and worry and added costs to everyone’s bills.

“But if some do still fail, consumer credit balances and green levy/renewables payments will be protected. Currently, they are used by some suppliers like an interest-free company credit card. 

“Moving forward, all suppliers will have to have enough working capital to run, without putting their customers’ credit balances at risk.”

The plans announced today (20 June) will mean energy retailers are required to protect their customers’ money, so that it isn’t lost if they go out of business adding costs to already high bills and causing a huge amount of stress and worry for customers.