‘Stop new suppliers taking cash upfront’
ENERGY regulator Ofgem has appointed a supplier of last resort three times already this year. The first was Green Star Energy, which took on customers of now defunct Future Energy in January. Before this, the process was only used twice in a decade – for GB Energy in 2016 and Electricity4 Business in 2008. The recent failures of Iresa and National Gas and Power come after Ofgem announced it would review the process for allowing new suppliers into the market. In June it said that it aimed to ensure ‘appropriate protections against poor customer service and financial instability’.
Experts are crying out for tighter regulation of licences granted to fledgling suppliers. Doug Stewart, chief executive of supplier Green Energy, calls Iresa’s failure a ‘consequence of Ofgem allowing anyone with £50 and a credit card to start an energy company’.
He says the regulator must make it a requirement for firms to bill ‘in arrears’ – meaning they are prevented from taking customers’ cash upfront before taking over a supply contract.
Gillian Guy, head of Citizens Advice, also argues for a tougher regime. She says: ‘The regulator’s upcoming review of licensing rules must make it easier to stop unprepared suppliers entering the market. It should also ensure poorly performing companies are taken out of the market faster.’
Though the failure of a provider does not interrupt household gas or electricity supplies, customers can still suffer. For example, a cashstrapped supplier may have raised direct debit levels or demanded payments customers had not budgeted for. Then there is the frustration of being unable to communicate with staff.
When suppliers fail, costs rise for the remaining providers and, ultimately, customers. It also puts consumers off switching to cheaper deals.