Ofgem announces new energy rules but fails to protect customer deposits

Taxpayers were left with a £9.2 billion bill when the suppliers were busted, but it was criticized for failing to protect consumer deposits.

Ofgem has announced a package of reforms designed to strengthen consumer protection and ensure energy suppliers are more resilient to market shocks.

Around 30 energy suppliers have collapsed since the start of the energy crisis. The collapse of the bulb is the biggest failure of all time Estimated to cost the taxpayer £6.5bn alone while the rest fail Consumers to cost £2.7 billion, Many of the failures were due to suppliers’ weak balance sheets, which were exposed when the wholesale price of gas began to rise sharply.

In response, Ofgem is proposing a series of reforms, including setting a minimum amount of capital that suppliers must hold – Reducing the risk and cost of supplier failures.

However, the Great Britain regulator said it would only “closely” monitor the use of credit balances. Some energy companies, including British gas owner Centrica, have argued that customer credit should be ringfenced to prevent suppliers from using consumers’ money for other corporate purposes. rivals, including the octopus suggested cheaper alternatives,

Central The chief executive, Chris O’Shea, criticized the decision, accusing Ofgem of “abdicating responsibility”.

He added: “When customers pay upfront for their energy, they are trusting their supplier to take care of their hard earned money. They will be amazed to find that their money is being used for day-to-day business activities. But this is exactly what is happening in some companies, and it undermines confidence in the market.

“If and when a major supplier fails, the recklessness of the decision not to address this issue will be clear to all.”

Ofgem said it would take further action if the use of the customer’s balance was found to be ‘reckless’.

Consumers typically pay more relative to consumption in the summer months, making large upfront deposits with suppliers, which are subsequently reduced during the winter.

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Ofgem’s chief executive, Jonathan Brearley, previously said some energy companies used customers’ credit balances “like an interest-free company credit card”.

He said on Friday: “We want suppliers to be able to be innovative and dynamic, while also ensuring they are financially stable, and that customers’ money is safe.

“It is a delicate balance and while Ofgem wants well-capitalised businesses that can withstand price fluctuations, we also do not want to block the market for new suppliers or for suppliers to sit on a lot of capital. Don’t want to be forced, they can invest in innovative ideas. We are seeking ideas from across the industry, identifying different business model suppliers to see if we have struck the right balance between flexibility and competitiveness.

Ofgem attempted to improve competition in the market but has been Criticized for being too slow to act As the energy crisis escalated, many new entrants failed.

The new rules will also require suppliers to have the required amount of money to buy renewable energy.

Ofgem announced a consultation on a range of other reforms, including a review of suppliers’ rate of return on investment and an update to its price range. Improvements are expected to begin next spring.

Read full story at the guardian.com

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