A new consultation, 'Supplier Licensing Review: Ongoing requirements and exit arrangements' includes proposals for Britain’s energy suppliers to provide the regulator with 'living wills' and independent financial audits when requested. Ofgem’s recommendations intend to protect customers from failing companies.

The Office of Gas and Electricity Markets (Ofgem), building on new regulations which came into force in July, is seeking public views on a range of new proposals to protect consumers. Since the end of 2016, 16 suppliers have collapsed.

A series of proposals are in the new consultation, they include:

  • assurance that senior managers ‘are fit and proper’,
  • that companies draw up ‘living wills’ outlining what would happen in event of failure,
  • a new requirement to compel suppliers to undertake an independent audit, conducted by an external auditor
  • financial and regulatory checks on the companies when they hit customer number milestones (50,000, 150,000, 250,000 and 500,000).

Ofgem said that audits would be needed when it felt problems in supplier operations required it and would include financial and operational assessments.

In a statement it said, “The ability to compel audits would strengthen our ability to effectively oversee poor performing suppliers. This would enable us to identify at an early stage where suppliers are in financial difficulty or may be at risk of failing to meet their customer service obligations.”

An earlier consultation found that stakeholders urged that it should only be used in exceptional circumstances and not be required for every compliance issue. The new proposal is that audits would be used when:

  • Ofgem has a serious concerns about a supplier’s financial resilience,
  • there is reason to believe the supplier is preventing Ofgem from performing its statutory duties - doubts about the accuracy to official requests,
  • specific technical or financial expertise is required to identify the root cause of customer service failures.

While Ofgem has recommended that audits be carried out by external parties to the energy supplier, the topic remains up for discussion. It does demand, however, that audits are “impartial and independent”.

Responses are requested by 3 December 2019


OFGEM consultation: Supplier Licensing Review: Ongoing requirements and exit arrangements