June 23

Ofgem Passes New Tough Regulatory Measures


The energy industry in the UK is suffering through a volatile phase due to geopolitical pressures and changing energy production methods, leading to a massive increase in prices. As a result, both consumers and regulators are struggling to meet rising expenses.  

Looking to address these concerns and bring some stability to the industry, energy regulator Ofgem, announced a series of regulatory reforms to protect energy suppliers from failing and ensure that consumers are protected from unfair practices through several new measures that could change customer-supplier relations.  

What do the new measures entail? 

Under the new plan, energy regulators must do the following: 

  • Tighten rules on direct debits charged to customers.  
  • Maintain credit balances at reasonable levels. 
  • Protect consumer credit balances and green levies.
  • Establish policies to ensure better control over assets 
  • Ensure the financial health of suppliers to meet challenges.

The measures are designed to ensure that suppliers can remain afloat during this difficult period as well as protect consumers’ credit balances. 

Why are the measures being implemented?

The measures were implemented to stabilise energy suppliers and protect consumers from unfair and exorbitant prices. Since 28th September 2021, over 28 energy suppliers have failed due to geopolitical pressures and the remaining organisations are struggling to provide service at affordable rates. 

Ofgem’s recent measures will encourage existing suppliers to better manage their financial assets to ensure they are well-financed and sustainable. The regulator also seeks to protect consumers from this volatility by mandating that suppliers must protect their customer’s money so that it isn’t lost if they go out of business, protecting consumers from the expensive, stress-inducing, time-consuming process of shifting to a new supplier. 

Moreover, when an energy supplier fails, Ofgem will help customers move to a new energy supplier with their credit balances and green levy/renewable payments intact, preventing the new supplier from using the credit as interest-free company credit. 

The recent proposals are part of Ofgem’s plan as part of a series of regulatory reforms to monitor how energy suppliers operate with the aim to build a more resilient market, protect consumers, and discourage risky behaviour that puts suppliers at risk. With these proposals, the industry may see a less adversarial relationship between suppliers and consumers.


Energy Industry, Energy Regulation

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