Ofgem unveils plans to protect consumers as energy crisis rages on

The regulator's new proposals will better protect bill-payers as energy bills soar.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The energy crisis has exposed key vulnerabilities in the business models of energy firms that don’t have the financial prowess of the Big Six energy suppliers, which could leave all bill-payers footing a sizeable bill when companies collapse.

“The new proposals will go some way in curtailing risky practices by requiring suppliers to have better control over key assets needed to operate and hold more capital so that credit balances are better protected and the tab isn't picked up by all customers if the supplier goes under.

“It is not uncommon for households to be hundreds of pounds in credit at this time of the year, as they plan for their bills to be much higher during the peak winter period. Ofgem hopes that its proposals will prevent credit balances from becoming excessively high.

“The energy sector is bracing itself for an agonising autumn in which the average household energy bill is set to rise by £800 a year. The energy crisis is far from over as the ongoing conflict between Russia and Ukraine continues to significantly influence the supply and price of energy.”

Key points

Proposed changes announced by Ofgem include:

• improvements to the financial health of suppliers, to ensure they can weather the current challenges and reduce the risk of failures
• protecting consumer credit balances and green levies when suppliers fail, to prevent the costs being picked up by consumers
• requirements for suppliers to have better control over the key assets they need to run their supply business, and 
• a tightening of the rules on the level of direct debits suppliers can charge customers, to ensure credit balances do not become excessive.