Ofgem announces tougher new rules for fledgling energy companies
UK energy regulator Ofgem will make companies applying for a license to supply energy undergo more stringent tests from June in a bid to drive up standards in the industry.
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Prospective energy companies will need to show they can properly fund their activities for their first year and provide clear plans on how they will ensure good customer service, Ofgem said today.
Directors, major shareholders, and senior managers will have to show they are “fit and proper” to hold an energy supply license when the new regulations come in to force in the summer.
Ofgem said it was responding to the fact that “in the last 18 months, a number of suppliers have failed many of whom provided a poor level of customer service”.
In January, the collapse of Economy Energy left 235,00 customers without an energy supplier and marked the ninth time a small supplier had gone bust within a year.
Mary Starks, executive director of consumers and markets at Ofgem, said: “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,” she said.
Starks said: “We will adopt a proportionate, risk-based approach to licensing suppliers and will continue to encourage competition and innovation, including innovative business models, which benefits consumers.”
Citizens Advice said the new rules were “good news” for customers. Chief executive of the information and advice charity, Gillian Guy, said: “The regulator is right to now turn its attention to the issue of poorly performing suppliers already in the market.”
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She said: “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.”