Business Save – Ofgem Announce New Supplier Licensing Requirements
New firms applying for a licence to supply energy will have to undergo more stringent tests from June. This is according to UK energy industry regulator Ofgem, who had previously stated their intention to introduce new measures. The tests are being introduced in order to raise standards for customers and reduce the risk of suppliers going bust.
New Energy Supplier Licensing Requirements
All new license applicants will have to demonstrate that they can adequately fund their business operations for their first year. They must also outline exactly how they intend to comply with key regulatory and market obligations. In addition to these requirements, they must demonstrate their ability to provide a satisfactory level of customer service.
Ofgem are also introducing a ‘fit and proper person’ test for directors, senior managers and major shareholders of energy companies. They will all have to demonstrate they are ‘fit and proper’ to hold an energy supplying license.
Small Energy Firm Closures
Over the past six months there have been eleven smaller energy firms that have gone out of business. Trade association Energy UK welcomed the new requirements, saying a couple of the firms gone bust had been their members.
Energy UK’s Chief Executive, Lawrence Slade, said:
“We want to see a future retail market where competition thrives and customers benefit from increased choice and service, and aren’t left picking up the tab when suppliers with unsustainable business models fail.”
Also welcoming the new tests was the Chief Executive of Citizens Advice, Gillian Guy. She agreed that Ofgem was right to focus on poorly performing suppliers, and highlighted those already in the market. Ms Guy said:
“Ofgem needs to take steps to identify those companies not delivering for their customers or that may be in financial difficulty.”
Ms Guy added that Ofgem should examine whether or not their current approach to resolving the problems it identifies is the correct one.
Customer Protection is Ofgem’s Primary Objective
Ofgem’s Executive Director of Consumers and Markets, Mary Starks, expounded on her organisation’s objectives by saying: “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.”
Ms Starks added that Ofgem intends to adopt a proportionate and risk-based approach to licensing suppliers. They also intend to continue encouraging competition and innovation, especially any innovative business models which benefit consumers.
If you want to find out more about the different energy suppliers and tariffs that can benefit your business, contact Business Save and their team of highly experienced energy experts.