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New energy suppliers face tougher checks from today

New energy suppliers face tougher checks from today

Companies will now have to pass tougher tests to get a licence to supply energy from today, after several small firms went bust. 

Several energy suppliers, including Brilliant Energy, Our Power, Economy Energy, Spark Energy, Extra Energy, Future Energy and Iresa Energy have stopped trading in the last 18 months.

In November 2018, energy regulator Ofgem launched a consultation on tightening checks on energy suppliers due to concerns about poor customer service and financial instability. In April, it announced it would introduce new, tougher tests to come into force today. 

Martin Lewis, founder and chair of MoneySavingExpert.com, previously called for "better quality control" of which firms are given licences. 

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What will energy firms have to prove?

Firms applying for licences to supply energy will have to prove they meet certain criteria. Each firm will need to show: 

  • That it has enough funding for at least the first year of operations. 
  • How it will meet its regulatory and market obligations and provide an adequate level of customer service. 
  • That its directors, major shareholders and senior managers are all "fit and proper" to hold a licence. 

Ofgem will also be launching a consultation in the autumn on new proposals to raise the standards of existing suppliers, including ongoing requirements and exit arrangements. 

What does Ofgem say? 

Mary Starks, executive director of consumers and markets at Ofgem, said: "The new requirements will help us to weed out those that are underprepared, under-resourced and unfit to hold a licence. This will help reduce the risk of supplier failure and help drive up standards for consumers.

"We will want to continue to encourage competition and innovation, including innovative business models, which benefits consumers, but also to ensure firms have robust business plans."