Citizens Advice Response to Ofgem’s Statutory Consultation – Supplier Licensing Review: Ongoing requirements and exit arrangements
Citizens Advice welcomes the final proposals in Ofgem’s Statutory Consultation as part of the Supplier Licensing Review on Ongoing requirements and exit arrangements. We were glad to see that many of our suggestions for protecting consumers were taken on board and look forward to the implementation of the new requirements.
The final proposals broadly aim to address four areas: promoting better risk management, more responsible governance and increased accountability, increased market oversight, and exit arrangements. Overall, we support the final proposals and detail our thoughts on each of them in the body of the report.
The final proposals are largely risk-based, which can enable flexible regulation in the retail energy market. But their successful implementation will rely on Ofgem closely monitoring compliance and taking swift action against suppliers early on when consumers are at risk.
The steps Ofgem is taking through these proposals will mean the regulator can better manage the risk of high mutualised costs. But the Renewables Obligation scheme has contributed the largest single mutualised cost resulting from supplier failures. We continue to call for the government to reform this scheme, and for Ofgem to continue its work on considering how the cost of mutualised credit balances can be reduced.
We also remain disappointed by the limited protections extended to protecting microbusiness credit balances - at a time when many businesses are struggling due to COVID-19, and suppliers serving this sector may be at higher risk of failure.
Many domestic customers are also more likely to have fallen behind on their bills due to the effects of COVID-19, and to have debit balances should their supplier fail. We think there is more that the government and Ofgem could do to help ensure that these customers are treated fairly by administrators of failed suppliers.
Given the additional risks and financial pressures caused by COVID-19 - and the various schemes that are in place to defer supplier costs until 2021 - we urge Ofgem to put these new rules in place as soon as possible in order to mitigate the potential risks of higher mutualised costs and customer service failures.