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On 11 April 2019, Ofgem, the UK’s gas and electricity market regulator, published its final proposals on new market entry requirements as part of its supplier licensing review.1 These final proposals are the outcome of a 10-month review prompted by a spate of electricity-supplier collapses and customer service quality failures as a result of those collapses. These proposals will apply to power and gas supply licences only.

At the same time as it published its final proposals, Ofgem also published a consultation on the detailed implementation of the new licensing regime. This included draft regulations for gas and power licence applications that will replace the current regulations introduced in 2010 (the Draft Regulations).2 The new licensing regime is expected to come into force in June 2019.

Authors: Prajakt Samant Charlotte Møller Simone Goligorsky Monika Lorenzo-Perez Sarah S. Bird

Background

The current regime requires any supplier applying for a licence to provide relatively basic information, including the applicant’s insolvency status and history; major shareholders and controlling persons; disqualification and criminal offences of its directors; and key dates for when the applicant expects to commence licensable activities.

In its final proposals, Ofgem notes that competition in the retail energy market has increased significantly in the last five years. Although this has brought benefits to consumers, through increased price competition and pressure on incumbent suppliers to improve customer service, there has been an increase in supplier failures, which has undermined consumer confidence in the market. It is notable that, since the beginning of 2018, 10 energy suppliers have collapsed. The collapse of an energy supplier is always of concern to the market as a whole, but particularly to end-user consumers, who risk not having an electricity or gas supply.

As a result, several suppliers have demanded that more rigorous, qualitative assessments of an applicant’s fitness to operate as a supplier should be introduced, including financial testing.