Citizens Advice Response to Ofgem’s Supplier Licensing Review
Citizens Advice welcomes the opportunity to respond to Ofgem’s consultation on supplier licensing. We have been calling for a review of the supplier licensing since 2013. Given the scale of the recent problems in the market, we think this review is clearly overdue.
We estimate that over 800,000 consumers have been been affected by the failure of ten suppliers through the Supplier of Last Resort (SoLR) process in the last 12 months alone. Indirectly, all consumers are affected as they bear the socialised costs of supplier failures, including the Safety Net (which includes the costs of managing SoLR transfers and protecting credit balances) and wider costs, such unpaid bills for renewables subsidies. The frequency of the failures also risks undermining trust in the industry, and could discourage some consumers from engaging in the market.
Ofgem’s review seeks views on the rules related to supplier entry, ongoing monitoring, and managing supplier exit. While new entry criteria cannot mitigate the risks that some licensed suppliers are currently placing on the market, they could prevent such suppliers from entering in the future. We therefore support Ofgem’s proposed changes to the licensing requirements, including detailed information requests and fit and proper requirements for applicants. We also support proposed changes to require the licence application to be completed by the leadership team that will be running the company. Furthermore, we think Ofgem should rapidly establish more effective ongoing supplier monitoring. This would help Ofgem identify suppliers that are failing to provide an acceptable service or have insufficient financial resilience. Better monitoring needs to be backed up by more timely regulatory action than has been the case in the past.
The consultation also sets out some early thinking on arrangements for supplier exits from the market. Based on our experience of recent supplier failures, we think this is an area that Ofgem should consider more urgently. We think there are some consumer protection gaps in the SoLR process that should be addressed, including administration of customer debt, transfer of smart prepayment meters, and protection of micro-business credit balances. Given the rate of recent failures and ongoing market turbulence, we also believe Ofgem should take immediate action to protect consumers from excessive socialised costs of failure, by considering changes to rules on credit balances and how renewable energy subsidies are paid.