New energy companies wanting to enter the UK market will be forced to show how they can fund their operations for their first year under new rules announced by Ofgem in response to a string of small household suppliers collapsing.
The energy watchdog said on Thursday that the directors, major shareholders and senior managers of any new company wanting to sell electricity and gas to households will also have to prove they are “fit and proper” to hold a licence.
The stricter rules, which will come in to force in June, have been drawn up following a flurry of failures of smaller suppliers over the winter, which had given rise to claims that entry requirements were too lax.
The new requirements will also require new entrants to detail how they expect to comply with key regulatory and market obligations and their intentions to provide a “proper” level of customer service.
Mary Starks, executive director of consumers and markets at Ofgem, said: “Applying new requirements on suppliers entering and operating in the market will aid us to weed out those that are underprepared, under-resourced and unfit. This will help minimise the risk of supplier failure and help drive up standards for consumers.
“We will adopt a proportionate, risk-based approach to licensing suppliers and will continue to encourage competition and innovation, including innovative business models, which benefits consumers.”