Regulator takes flak over energy supplier licencing

Gas and electricity regulator Ofgem assured businesses this week that they would not be cut off if their supplier went bust.

The alarm was raised last week, when Solihull company Independent Energy announced it was calling in a receiver because of the impact of billing problems on its cash flows – the first time a supplier in the deregulated power market has faced collapse.

Hundreds of thousands of households and businesses were plunged into uncertainty about the security of their gas and electricity supplies, and the National Electricity Consumers Council criticised Ofgem for not vetting the company’s financial affairs properly. ‘We do not believe that this situation should have been allowed to arise,’ said Rodney Brooke, the council chairman. ‘The collapse of Independent Energy shows the critical importance of full financial vetting of licenced suppliers,’ he added.

Ofgem said this week that there were arrangements for it to appoint ‘a supplier of last resort’ for gas customers where a supplier went bankrupt and that there would soon be a similar provision for electricity under the Utilities Act passed earlier this year.

The 230,000 customers of Independent Energy are not actually in this position yet, as the company is still operating in receivership. Several larger players – including National Power – are also interested in taking it over, so the emergency procedure is unlikely to be required. However, the scare has created a new uncertainty in the energy market and may inhibit customers from changing their supplier in future