UK energy regulator plans to make it more difficult for new energy providers to start trading as it seems to deal with an increasing number of failed ventures and faulty customer service among smaller players in the industry.
Ofgem announced on Wednesday that the proposals would be to be suppliers to prove they have adequate financial resources and can meet customer service commitments before obtaining a license to supply energy.
"Complaints against certain suppliers have been rising recently, we should have entered when others stopped trading," said Mary Starkes, chief consumer and market manager at Upham, Inc. "Our new tests for vendors looking to enter the market will ensure that consumers are better protected against the risk of poor performance."
The move follows government efforts and has been shown to increase competition in the industry in recent years, and has led to the awakening of new competitors. In June, there were 73 active suppliers of electricity and gas, compared with 60 suppliers a year ago and only 14 active at the end of 2011.
At the same time dominance of the players "Big Six" incumbent has reduced, and a quarter of customers today with small and medium-sized suppliers. But questions have been raised about the viability of some of the new players: five have emerged from the market so far in 2018 and consumer group Citizens Advice expressed concerns about high levels of poor customer service among some.
Under the new steps – which Ofgem hopes to put in place in late spring 2019 – new providers will have to prove that they have the funds and resources to manage their business at least 12 months after entering the market. They also need to plan a plan of how they intend to meet the various customer service obligations.
The regulator said it would also consult new reporting requirements for suppliers already active in the market.