Energy companies will be subject to limitations on direct debit overpayments, and customers’ credit balances will be protected if their supplier fails.
Ofgem’s measures include limits on payments billed via direct debit to “prevent excessive credit balances.”
Other proposals include ensuring that suppliers have sufficient funds during difficult times and granting firms adequate control over key assets.
Also included are regulations to safeguard these credit balances if a company fails and its customers are transferred to a new supplier.
Last year, over twenty-five energy suppliers, failed, and the cost of transferring their customers to new suppliers was £94 per household.
This included the cost of new suppliers having to purchase additional gas at record-breaking prices, the cost of replacing lost customer credit balances, and the cost of green levy payments.
The price ceiling is expected to increase by £830 to $2,800 in October, prompting the announcement made on Monday.
This will exacerbate the cost of living crisis for those who are already struggling with rising national insurance, council tax, fuel, and food prices.
Jonathan Brearley, chief executive officer of Ofgem, stated, “Today’s plans are another step towards ensuring that the complex energy market is fair, resilient, and beneficial for all.”
“The energy market remains extremely volatile, and several enormous geopolitical issues continue to exert enormous pressure. Ofgem exerts significant effort to ensure that energy suppliers strengthen their positions to weather the ongoing storm.
By ensuring that suppliers are well-financed, sustainable, and have more robust business models, we can avoid the supplier failures we witnessed last year, which caused enormous stress and added costs to everyone’s monthly bills.
“However, consumer credit balances and green levy/renewables payments will be protected if some still fail. Currently, some suppliers use them as interest-free business credit cards.
“In the future, all suppliers will be required to have sufficient working capital to operate without jeopardizing their customers’ credit balances.
“Today’s proposals will ensure that customers’ hard-earned money is adequately protected so that if a company fails, it will pay the bill and not the consumers.”
Citizens Advice’s Gillian Cooper stated, “Ofgem has previously permitted energy suppliers to operate risky business models. As a result, when companies fail, the customers have left to foot the bill.
“We are pleased that Ofgem has heeded our warnings and is taking steps to address some of the underlying causes of these problems.
“It must now ensure that suppliers adhere to these stricter standards to protect individuals in the future.”
