Ofgem’s Energy Supplier Licensing Review: what’s being planned part 3

Audits and market oversight

In its statutory consultation, Ofgem sets out its aims to increase the effectiveness of its oversight of the energy supply market to identify any potential risks to consumers or its competitiveness.

To do this the final proposals include introducing the ability for Ofgem to request independent audits that ensure suppliers have a sound continuity plan in place and require effective and proportionate reporting of both their finances and customer service systems and processes.

Under this new requirement, the audits could also be used to satisfy Ofgem on any concerns over a supplier’s financial risk, verify how many domestic customers they have and detect any possible risks to the business’s stability.

Currently, an energy supplier has been required to carry out audits when required by Ofgem as part of the resolution of compliance issues, however, these new regulations will grant Ofgem the power for them to compel an audit without any compliance concerns or enforcement process being used.

Some industry experts, however, are concerned that a request for an independent audit could result in accelerating an already struggles supplier’s failure. Consumers will likely seek to switch their supplier if they learn their current one is struggling and is under pressure from the regulator to carry out an audit.

Customer Supply Continuity Plans

Formerly known as ‘Living Wills’ Ofgem will change the name to Customer Supply Continuity Plans in order to make the purpose and content of the plans clearer.

The purpose of this requirement is to ensure that suppliers have accurate plans in place to ensure the safeguarding of an energy supply to customers in the event the business exits the market. Such plans also help ensure that consumers face minimal disruption in the event of a Supplier of Last Resort (SoLR) process.

The plans should include:

• In-depth details of the arrangements made with third parties that ensure the continuity of energy billing, Priority Service Register (PSR) and payment processing
• The plans for handovers and customer account information
• Details of key contacts at the energy supplier such as team leaders, managers, and directors
• Access to accurate data and the details of how to access data sets, and where data sets are held. Details of how the supplier proposes to keep its data sets up to date

Some in the industry have raised concerns over the tweaks to the regulation as they say that none of the detail of what Ofgem will want to see is actually contained in the enforceable requirements and that whatever plans were initially put into place may not be reliable in the event of a supplier failing and/or exiting the energy market.

Monitoring and reporting requirements

Ofgem has changed the name of the ‘change of control’ requirement to ‘additional reporting requirement’.

The requirement is designed to ensure that any big changes in the ownership or running of an energy supplier do not result in a drop of customer service standards.



The regulator must also be adequately informed of any changes that could result in negative changes to the suppliers financial and operational circumstances.

Exit Arrangements

The final proposals also include changes that increase Ofgem’s oversight when an energy supplier exits the market.

A requirement that will see energy suppliers have to include references in their contract terms and conditions that any activities involving debt recovery will be carried out within the relevant licence conditions to make sure that consumers are treated fairly if they’re in debt.

The new proposals will also ensure the prevention of customer book sales that could result in harm to consumers and ensure that energy suppliers will honour the terms of any SoLR bids that they make. 

Tweaks to the SoLR requirements

There’s also likely to be changes made to the current SoLR requirements in the form of preventing energy suppliers from partaking in commercial activity that could negatively impact the SoLR process.

The first proposed change is to introduce a clause in deemed contracts that hold the supplier to honour customer credit balances when bidding to become appointed as a SoLR. The second tweak will require energy suppliers to take all possible action they can to ensure that they will honour the terms of a SoLR bid.

What next?

Once these licence conditions are officially introduced, they cannot then be challenged by suppliers simply because they don’t agree with how Ofgem then enforces them.

The statutory consultation on supplier licencing is open until August 20th so if an energy supplier has any issues with the planned changes being proposed they have until then to challenge them.

If you have any questions or need expert advice on the new regulations or are looking to enter the energy supply market get in touch with Dyball Associates today. 

Further Reading

Ofgem’s Supplier Licensing Review: what’s being planned part 1

Ofgem’s Supplier Licensing Review: what’s being planned part 2

Ofgem to introduce new standards for smaller energy suppliers this winter

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