Martin Lewis says "it is time that much stricter tests were set up before firms are granted licences" following Iresa collapse

Responding to the news that Iresa – a small energy supplier with tens of thousands of customers – has ceased trading, Martin Lewis, founder of MoneySavingExpert.com and cheapenergyclub.comsaid:

On Iresa…

"Sadly, Iresa’s demise was entirely predictable. Since it first launched, we have warned in our Cheap Energy Club that its prices looked unsustainable and it was raising concerns for us.

"When Ofgem introduced special measures for Iresa, we welcomed the move because it has been an absolutely appalling company that hasn’t communicated with its customers and has left many people tearing their hair out.

"And while in the short term this will be very frustrating for its existing customers, hopefully when Ofgem ports them to a new company things will improve."

A change is needed in the energy market as a whole…

"There is a wider issue in the energy market with the political push to encourage as many new entrants as possible. While increasing competition is important, it cannot be done at all costs. It is time that much stricter tests were set up before firms are granted licences.

"1. The people setting them up must be ‘fit and proper’ – energy is a key public service and can’t be run by those looking for a quick buck or at the extreme to rip people off.
"2. Firms need appropriate financial means. If not there’s a risk they operate like a Ponzi scheme aiming to draw people in with unsustainably cheap prices to gain cash flow, without the resources to support those customers.
"3. There should be capacity limits based on the infrastructure set-up. Too often firms come in with loss-leading prices which attract large numbers of customers, but an inability to deal with those volumes.

"The good news is that on the back of our suggestions, Ofgem announced 6 weeks ago it will review its licensing around this. And I hope that if these measures are put in place, we won’t see the likes of Iresa again."

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