British energy regulator Ofgem has set out measures to boost the financial resilience of suppliers, including stress tests and a review of its policy on price caps, after a string of bankruptcies triggered by soaring gas prices.
Ofgem’s role has come under scrutiny after more than 20 British suppliers went bust over the past few months, caught out by record wholesale gas and power prices they were unable to pass on to customers because of the price cap.
A 500% jump in gas prices in less than a year has exposed some energy suppliers’ vulnerability to price shocks, Ofgem said on Wednesday.
“Today I’m setting out clear action so that we have robust stress testing for suppliers so they can’t pass inappropriate risk to consumers,” said Ofgem Chief Executive Jonathan Brearley.
“I want to see more checks on staff in significant roles, and better use of data to help us regulate.”
Energy suppliers will undergo financial stress testing from January to measure their resilience against a range of scenarios.
Suppliers will also be required to perform self-assessments of their management, Ofgem said, adding that it had extended the period of assessment for new supplier licences to nine months.
Ofgem is also seeking views on whether to adapt the price cap methodology to better handle energy market volatility.
“There is a risk that, if not tackled, this could lead to higher costs for consumers,” it said.
In addition, Ofgem opened a consultation on potential short term, temporary interventions, such as availability of new tariffs as well as fees and charges to help to stabilise the market.
(Reporting by Pushkala Aripaka in Bengaluru and Nora Buli in OsloEditing by Subhranshu Sahu and David Goodman)
