Martin Lewis: stricter energy supplier tests should “rebolster people’s faith that they can switch”

After suggestions from MoneySavingExpert.com over a year ago, the energy regulator, Ofgem, has announced that from June, new energy suppliers will have to demonstrate they have adequate financial resources and can meet their customer service obligations before being awarded a licence to supply energy to consumers. Directors and major shareholders will also have to pass a ‘fit and proper person’ test.

Martin Lewis, founder of MoneySavingExpert.com said: “For a few years now there have been too many one-man-and-his-dog suppliers in the energy market – pushed by the Pavlovian political response that only more competition will improve things. 

“Yet, this has been incredibly damaging to people’s confidence in switching. When I explain how to compare tariffs, I’ve had to constantly urge people to ‘scroll down’ as most of the very cheapest are usually loss-leading providers trying to rapidly build market share to help their cash flow. They offer unsustainable prices, and are sometimes unsustainable companies. I personally wouldn’t switch to many of these new small suppliers. Especially as there are still £300/yr-odd savings to be made going with still cheap but reliable providers with a good track record. Even I would say it’s worth going with safety over purely the cheapest price.

“It’s for this reason when I met Dermot Nolan, the CEO of Ofgem, many months ago, and he asked me what needs doing to help switching, my answer was that we need better quality control of who is given a licence. I suggested a ‘fit and proper person’ test, a financial solvency test, and a capacity test to see how many customers should be allowed to sign up.

“He promised me he’d look at that – it’s taken over a year, it put out a consultation on the idea, and now it’s going to happen. This should help rebolster people’s faith that they can switch, and switch in safety. And that means overall lower bills for many who need it.”