Ofgem introduces tougher entry requirements for energy providers

From June 2019, applicants will have to demonstrate sufficient funding, provide a customer service plan and pass a fit and proper test.

The first quarter of 2019 saw a spate of small suppliers cease trading after Ofgem imposed sanctions on them over poor customer service.

Ofgem said it will be launching a consultation on ongoing requirements for suppliers currently in the market in the summer.

This will include considering new reporting requirements for suppliers who are already active in the market and rules around how suppliers manage customer credit balances. Ofgem will also review the arrangements for suppliers exiting the market.

Following the supplier failures, Ofgem’s moved to protect domestic customers’ credit balances and reassigned the affected customers to new suppliers in order to continue their energy supply.

It is hoped strengthening entry and ongoing requirements on suppliers will help to drive up customer service standards and reduce the risk of disorderly supplier exits.

Mary Starks, executive director of consumers and markets at Ofgem, said: “In an ever-evolving market, Ofgem’s objective is to protect consumers while also ensuring they enjoy the benefits of increased competition and innovation that successful new firms entering the market bring.

“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.”

Gillian Guy, chief executive of Citizens Advice, said: “Ofgem’s new rules are good news for consumers. From June, firms entering the market will need to be set up to deliver good customer service and be financially sound.

“The regulator is right to now turn its attention to the issue of poorly performing suppliers already in the market. Ofgem needs to take steps to identify those companies not delivering for their customers or that may be in financial difficulty and examine if its current approach to resolving problems it identifies is the right one.”