June 9

UK energy suppliers face more scrutiny as bills rise


Ofgem, the UK’s energy regulator, has expanded compliance reviews for all energy firms to ensure their financial health.

Energy suppliers must respond to four additional assessments to determine an organisation’s financial health and ensure fair tariffs for customers.

The new move already comes on top of the four additional assessments that were introduced in April. This move will undoubtedly amplify expenses at a time when energy prices have risen by more than 42%.

What will the new reviews cover?

The four reviews will cover the following areas: 

  • Fit and proper: Ensures that firms meet the requirements when reporting senior personnel changes. 
  • Asset ownership: Reveals what significant assets the energy supplier controls and owns.
  • Risk management: Identifies and monitors risks, specifically, financial risk within the organisation.
  • Tariff setting: Ensuring tariffs are fair and sustainable for consumers, despite the rise in prices.

The purpose behind these reviews is to determine the financial viability of each energy supplier and to ascertain whether these suppliers can provide energy to customers without a massive price hike. 

Why the increasing scrutiny on energy providers?

Since August of last year, over 4 million households have lost their energy supplier due to massive increases in energy costs.

Most of these energy suppliers could not pass on these costs to consumers, leading to high losses and their subsequent closure. 

At the time, Ofgem was criticised for not taking enough steps to ensure that suppliers were run by competent, financially prudent executives. 

In response, Ofgem decided to set up checks in the form of reviews to ensure that all energy suppliers can provide energy to consumers at sustainable rates. 

What does this mean for energy vendors and suppliers?

In the past year, we have seen energy prices rise by over £700, which has hurt both consumers and producers.

In response to this situation, Ofgem has looked to mitigate the disruptions to energy supply by ensuring that energy providers have the resources and the know-how to navigate this turbulent period to ensure that consumers get a steady supply of energy. 
For vendors and producers, this means that organisations need to take additional measures to make compliance more feasible and manageable and to avoid being overwhelmed by energy risk management responsibilities.


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