Energy firms face stricter tests after collapses

16/12/2021 10:05
Jan - Ovo Energy to pay £8.9m for overcharging customers.jpg

Energy companies will face more robust financial checks from January after a host of companies failed owing to a wholesale price surge, the regulator Ofgem has announced.

Bosses of firms will also undergo more stringent vetting.

More than 20, mostly small, suppliers have collapsed following a spike in wholesale gas prices.

Nearly four million other households have seen their supplier fail since the start of the pandemic.

The regulator also said it was consulting on the future set up of the energy price cap, designed to protect customers who have not switched. It has been highlighted as part of the problem by some failed companies.

"I am setting out clear action so that we have robust stress testing for suppliers so they can't pass inappropriate risk to consumers," said Ofgem chief executive Jonathan Brearley.

"Our priority has been, and will always be, to act in the best interests of energy consumers. The months ahead will be difficult for many, and we are working with the government and energy companies to mitigate the impact as much as we can, particularly for the most vulnerable households."

A significant rise in bills for 15 million people is inevitable in April, but Ofgem is also consulting on possible changes to the way tariffs are offered in the longer-term.

Options include customers being tied in to a standard tariff for six months, like a fixed term mortgage. If they left early for a cheaper deal, they would be charged an exit fee, unlike now.

The argument is that suppliers and remaining customers would not be left picking up the cost of their departure, although exit fees would be controversial.

Other suggestions include forcing companies to offer the same price to existing customers as they do to new customers. A similar rule is being introduced for home and motor insurance in January.

Read the full story here.

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