Ofgem’s New Rules for Energy Firms Criticised by British Gas Owner

A cyclist passes the British Gas Centre in Leicester, UK, on Oct. 17, 2013. (Christopher Furlong/Getty Images)

Reforms designed to protect customers and ensure energy suppliers are resilient to market shocks have been proposed by the energy regulator, however, British Gas owner Centrica accused Ofgem of an “abdication of responsibility.”

On Friday, Ofgem released fresh proposals which included stamping out the misuse of credit balances, reinforcing rules on how all domestic providers use customer balances.

Also put forward was a requirement for suppliers to ring-fence money they need to buy renewable energy.

It also proposed setting a minimum amount of capital that suppliers must hold so the regulator can be reassured they can withstand future shocks.

Ofgem said it is seeking feedback on the plans and hopes to publish the reforms in the spring.

Undated photo showing some cash in Sterling with a mobile photo displaying the words "your latest energy bill." (Jacob King/PA Media)

Profound Impact

But the plans were heavily criticised by the UK’s biggest energy supplier.

British Gas owner Centrica said they did not go far enough after previously arguing that customer credit should be ring-fenced to prevent suppliers from using consumers’ money for other corporate purposes.

Chris O’Shea, chief executive of Centrica, said: “When customers pay upfront for their energy, they are trusting their supplier to look after their hard-earned money.

“They would be appalled to learn their money was being used to fund day-to-day business activities, but that’s exactly what’s happening in some companies, and it undermines confidence in the market,” he said.

“We identified this as a major risk to consumers in 2016—years before the energy crisis—and Ofgem promised to fix this. This feels like an abdication of responsibility by a regulator not focusing on the right things,” added O’Shea.

Ofgem Chief executive Jonathan Brearley said: “The energy crisis has had a profound impact on the sector, its business models, our approach to its regulation, and the way we think about risk.”

“These proposals will provide protections, checks, and balances for consumers, suppliers, and the entire sector to create a more stable market,” he said.

“We want suppliers to be able to be innovative and dynamic, while also making sure they are financially stable and that customers’ money is protected. Ultimately, we have a responsibility as a sector to ensure we are protecting consumers’ interests by making sure our financial regulations are as robust as they can be,” he added.

“At a time of extremely high energy bills, that responsibility is more important than ever,” said Brearley.

‘Severe Weaknesses’

Last week, seventeen British energy suppliers were told they have to improve how they deal with vulnerable customers.

Ofgem said that a review had identified “severe weaknesses” at five suppliers: Good Energy, Outfox, SO Energy, Tru Energy, and Utilita.

At the time, Ofgem’s director of Retail Neil Lawrence said: “From eligible customers who are missing out on free gas safety checks through to companies not identifying vulnerable customers to be offered obvious support on the Priority Services Register, this robust review has highlighted that suppliers need to do more to support consumers.”

He said that “most suppliers” take their responsibility to protect vulnerable customers seriously and that they have launched many new initiatives.

But despite some improvement, he said: “We’ve seen a number of failings across the board which need to be urgently addressed.

“It’s going to be a very challenging winter for everyone and customers must be confident they are getting the help and support they need.

“My message to suppliers today is simple—be proactive. Help your customers to know what support is available, and then deliver it.”

Dozens of energy suppliers have collapsed since the start of last year after being unable to cope with skyrocketing energy prices.

Reduce Energy Consumption

Chancellor of the Exchequer Jeremy Hunt, leaves Downing Street following the first Cabinet meeting with Rishi Sunak as prime minister, in London on Oct. 26, 2022. (Victoria Jones/PA)

On Thursday UK Chancellor Jeremy Hunt urged people to reduce their energy consumption so that Britain is not susceptible to disruptions in international energy supplies.

Talking to the Treasury Committee of the House of Commons on Nov. 23, Hunt warned that people will “have to take responsibility for their energy bills” and reduce their usage or there will be a “huge additional burden on taxpayers.”

The government is set to spend billions of pounds on its energy support scheme, which shields households and businesses from sky-high energy prices by capping the average costs.

Hunt told the committee: “What we can do is say we’re going to help you this year with the £2,500 ($2,960) cap, we’re going to help you next year with the £3,500 ($3,500) cap, we’re going to help you conserve the energy you use and for the poorest people we’ll try and find a more effective structure.

“But we are saying to people that in the end everyone is going to have to take responsibility for their energy bills and they’re going to have to think about how they’re going to reduce their energy consumption.

“Because it is a national mission to make sure that we can’t be blackmailed by people like [Russian President Vladimir] Putin when they do things that interrupt international energy supplies.”

PA Media and Alexander Zhang contributed to this report.