ENERGY firms are set to face tougher checks as they expand under a drive by the sector regulator Ofgem to reduce the risk of suppliers going bust and to ensure consumers don’t have to bear the cost of failures.
A range of smaller players have ceased trading amid pressure on revenues following the introduction of a price cap by Ofgem last year including GnERGY, Breeze Energy and Toto Energy.
READ MORE: Can green energy revolution create enough jobs to make up for Scottish oil decline?
Ofgem has published plans for reform which it said would drive up service standards, reduce the risk of further supplier failures, and strengthen the safety net for consumers.
It reckons the Covid-19 crisis has underlined the key role that energy suppliers play in society and the importance of ensuring they are in shape to cope with potential challenges.
The fallout from coronavirus has hit demand for energy and left many consumers struggling to pay their bills.
Mary Starks, executive director of Consumers and Markets, said: “Energy suppliers have been at the core of the industry response to the Covid-19 crisis, protecting customers and the energy supply of those most in need.
“Now more than ever we need to ensure that suppliers are set up in the right way to treat customers fairly and meet the challenges of today’s energy system.”
The proposed measures will continue Ofgem’s efforts to ensure the liberalisation of the energy market works for consumers. This has resulted in lots of new players entering the market to challenge giants such as SSE and ScottishPower.
However, Ofgem noted 18 suppliers had exited the market since the start of 2018 while others had failed to meet their financial commitments under government schemes such as the Renewables Obligation.
The energy supply subsidiary of Borders-based Spark Energy failed in November 2018 and its parent company was sold to Ovo Energy.
READ MORE: Ofgem takes action as Spark Energy subsidiary fails
After introducing tougher tests for new entrants last year Ofgem intends to increase its scrutiny of growing firms.
The plans include the introduction of “milestone assessments” for firms that pass the 50,000 and 200,000 domestic customer thresholds. Ofgem said it could restrict firms from taking on new customers if it thinks they are not ready for growth or able to meet their regulatory obligations The rules are due to come into force in the winter.
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