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The UK’s energy market regulator Ofgem will be reassessing later this year whether domestic energy suppliers should meet stricter financial requirements, both before and after being awarded supply licenses, the watchdog’s chief executive Dermot Nolan said on Thursday.
Rising wholesale prices and a growing number of energy suppliers – many of whom are very small – have created a lot of interest in the financial stability of the UK energy sector, Nolan said in a speech at Ofgem’s annual Forward Work Programme event.
There has been concern that very small energy suppliers may not have the financial means to forward-buy energy. Currently, Ofgem can monitor the financials of energy suppliers and in case a company goes bust, the regulator can revoke its supply license and appoint another supplier to serve customers.
“We have had many representations from those who consider we should require companies to meet more significant financial tests both before and after receiving a license,” Nolan said and went on to add:
“So we will review our approach to awarding supply licenses, the financial requirements on suppliers, and how we monitor supplier performance later this year.”
The UK will be looking more closely into the way key markets function, including the retail energy market, Chancellor of the Exchequer Philip Hammond said in his Autumn Statement in November 2016, potentially signaling there will be more scrutiny into how the UK’s Big Six energy suppliers are doing business.
The UK’s energy regulator Ofgem lists the large energy suppliers, often also referred to as the ‘Big Six’, as the companies holding supply licenses and supplying most of the energy to domestic households in the UK market. These six firms are: Centrica plc (the parent company of British Gas), E.ON UK, Scottish and Southern Energy (SSE), RWE power, EDF Energy, and ScottishPower. Apart from the Big Six, there are currently more than 40 other energy suppliers in the UK.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.