Ofgem have recently proposed further new checks and testing for existing energy suppliers. The additional new rules will apply to all energy companies to improve customer service standards. They will also reduce the risk of supplier failures and strengthen Ofgem’s safety net.
Existing suppliers will now need to inform Ofgem of any independent audits of their customer service operations and financial status.
More Checks to be Introduced by Ofgem
Ofgem have already implemented additional checks for any new suppliers joining the industry. These were introduced after a string of smaller and newer suppliers collapsed in the wake of fluctuating wholesale energy prices. This left tens of thousands of customers needing to be hastily connected to a new supplier. Now new suppliers must demonstrate they can financially withstand any significant rise in wholesale prices.
These latest checks however will apply to all existing suppliers to ensure they too can survive price fluctuations. Ofgem is also using the opportunity to ensure every supplier provides adequate customer service.
What the New Energy Supplier Checks Involve
Ofgem say they will consult firms on reforms for existing suppliers to drive up customer service standards. They will also attempt to reduce the risk of supplier failure and strengthen the Ofgem safety net.
Suppliers, especially fast-growing ones, will have to demonstrate to the industry regulator that they’re able to serve additional customers effectively. They must also show that they can meet industry obligations whilst remaining financially viable.
Ofgem says they expect competition and innovation which benefits consumers to continue after reforms are implemented.
Suppliers Must Demonstrate ‘Operational Capability’
A statement by Ofgem – which stands for the Office of Gas and Electricity Markets – reads: “Building on the new entry requirements for new suppliers that came into force in the summer, the new rules for existing suppliers would let Ofgem request independent audits of suppliers’ customer service operations and financial status.
“As part of this, new checks would be introduced for growing suppliers before they hit certain thresholds of customer numbers requiring them to ensure they have the operational capability to effectively serve their customers. If they fail the checks, they would be stopped from taking further customers on.”
The energy watchdog has also proposed new ‘fit and proper’ requirements for the senior management positions of energy firms. This is to ensure those running the companies are actually capable of carrying out their duties.
Reforms to Create ‘More Accountability in the Market’
Ofgem’s Executive Director of Consumers and Markets, Mary Starks, explained:
“Our regulatory regime needs to be effective and proportionate in protecting consumers, while continuing to facilitate competition and innovation. At this stage in the transition to a net zero emissions economy it is more important than ever that innovators can enter the market and prosper, driving benefits for consumers.
“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.”
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