Regulator Ofgem has announced a series of measures aimed at improving the financial health of energy suppliers so they can withstand future shocks in the energy market.
The proposed changes aim to reduce the risk of suppliers going bust and provide better protection for customers if they do. They are part of wider measures to encourage sustainable business models and stop risky behaviour.
The regulator pointed out the cost of moving customers to new suppliers from 28 failed ones since September 2021, including new suppliers having to buy extra gas at short notice while prices were at record highs and replacing lost customer credit balances and green levy payments, was £94 per household.
The proposals aim to better protect consumer credit balances and RO payments in the event of company failure, and improve the capital adequacy of suppliers to ensure they can survive critical periods.
Jonathan Brearley, CEO of Ofgem, said the energy market remains “incredibly volatile” and geopolitical issues continuing to apply “massive pressure”.
“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,” he said.