ICSM Business News: Ofgem moves to change finance rules for energy firms after 40 firms go bust costing the taxpayer even more than the banking bailouts

ICSM Business News: Ofgem moves to change finance rules for energy firms after 40 firms go bust costing the taxpayer even more than the banking bailouts

By Harry Mottram: ICSM’s Ian Carrotte has welcomed Ofgem’s plans to tighten financial regulations for the energy industry following yet another firm collapsing and costing the taxpayer billions. Bulb has been taken over by rival Octopus but at a cost of more than £5bn pound bailout to the Government in a bailout. It’s the 40th collapse of an energy company since 2018 that has seen a free for all in the sector replaced by a series of business failures with the taxpayer picking up the bill.

Ian Carrotte said: “It’s high time Ofgem did something to stop the rot and insist energy firms ring fence customers’ cash – as it is a scandal that they use our upfront payments to run their day-to-day business. I’d like to see much tougher rules as it is the staff, the suppliers and the contractors who support these companies together with taxpayers who pay the price when they go under.”

Ofgem said their proposals will be published early in 2023 but it hasn’t satisfied Centrica chief executive Chris O'Shea. He said: "When customers pay up front 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.

"We identified this as a major risk to consumers in 2016 - years before the energy crisis - and Ofgem promised to fix this. Energy companies must be adequately capitalised by their shareholders so that if they fail, the shareholders feel the pain, not UK consumers. It really is as simple as that, but it appears lessons have still not been learnt. This feels like an abdication of responsibility by a regulator not focusing on the right things. If and when a large supplier fails, the recklessness of the decision not to address this issue will be clear for all to see."

However, Ofgem's chief executive said there was a difficult balancing act to protect customers’ cash and not burden energy firms with too much red tape.

Back in the 1980s the Conservative Administration of Margaret Thatcher began the process of privatising energy creating 12 regional companies. Since then, further sell-offs and acquisitions have taken place with a proliferation of start-up companies vying to outdo each other on price until energy prices began to rise. Since 2018 40 firms have collapsed leaving a handful of businesses including the so-called big six of British Gas, EDF Energy, EON, Npower, Scottish Power and SSE.


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