Ofgem plans aim to better protect bill-payers as energy crisis rages
25th November 2022 11:07
by Myron Jobson from interactive investor
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Proposal to ring fence customers' cash scrapped.
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.
“But the energy regulator has scrapped a planned requirement for suppliers to ring fence customer credit balances, allowing them to continue investing the capital. It would instead monitor the use of such funds. The worry is this would lead to risky and irresponsible practices which could heighten the cost burden on bill-payers if they backfire.
“The energy crisis is far from over and prices are likely to remain inflated for some times as countries scramble to replace supplies of Russian gas, which have been cut since its devastating invasion of Ukraine. Without government support, the average household would be paying around £4,279 for energy under the new cap, which comes into effect in January - an unfathomable amount which is 70% more than the level between October 2021 and March 2022.
“The launch of Ofgem’s proposals comes on the same day of an ONS survey which revealed that more than half (55%) of adults said they were worried about keeping warm in their home this winter, rising to 70% of those living in the most deprived areas.
“We are currently in uncharted waters when it comes to the cost of energy and despite the various cost of living measures, many people are struggling to keep on top of bills as the temperature dips. Those in this predicament should contact their energy supplier as their first port of call to ask for support. It is worth consulting a debt advice charity such as StepChange or Turn2Us and they will go through all your options.”
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