Energy suppliers to face tighter rules, says Ofgem

Energy regulator Ofgem is to tighten up the rules for new suppliers of gas and electricity after nine new entrants ceased trading.

The latest to collapse was Economy Energy, which ceased trading on Tuesday. Ofgem is looking for a new supplier for its 235,000 customers.

Mary Starks, Ofgem’s executive director for consumers and markets, told the BBC that there was “room for improvement” in the licensing regime.

She also defended the new price cap.

This caps prices at £1,137 a year for an average dual-fuel customer who pays by direct debit.

Speaking to BBC Radio 4’s Today programme, Ms Starks said that new suppliers were subject to rigorous background checks and subject to financial requirements.

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“That said, we do said we do think there is room for improvement in the licensing regime and we are conducting a review of our licensing arrangements at the moment, with a view to strengthening our requirements to raise standards in a couple of areas, particularly around customer service and financial resilience,” she said.

Consultation is under way and new rules start to be introduced in April.

One of the areas that would be looked at, she said, was the “readiness [of firms] to weather the challenges in this market”, particularly when wholesale prices of energy go up.

She defended Ofgem’s approach, saying there were now 60 energy suppliers, compared with a dozen or so a few years ago, to take on the Big Six suppliers.

In the past year, a number of small energy suppliers have gone bust, including Spark Energy, Extra Energy, Future Energy, National Gas and Power, Iresa Energy, Gen4U, One Select and Usio Energy.

The prices offered by the Big Six – British Gas, EDF Energy, E.On, Npower, Scottish Power and SSE – have clustered around the cap. Ms Stark said it was early days for the cap, which only came into force at the start of the year.

“I think the prices at which the Big Six are clustering now are lower than they otherwise would have been, so it’s win in that sense,” she said.

And, she added, there were better deals on the market for customers who wanted to shop around.