Letter from the Editor: Time to get tougher on new entrants

As two more energy providers cease trading within days of each other, this has hardly been the market’s finest hour.

To borrow a well-known phrase – to lose one provider may be regarded as misfortune, to lose two looks like carelessness.

Certainly, this week’s news that two energy suppliers have ceased trading within days of each other has hardly been the market’s finest hour.

The collapse of Iresa, with 100,000 customers, and the revoking of National Gas and Power’s (NGP’s) supply licence to its 80 business customers, shows lessons must be learnt, and quickly, if a range of small, challenger energy brands are to remain viable long-term prospects in a truly liberalised sector.

If not, then the licensing regime Ofgem says has so “successfully supported” consumer choice by boosting supplier numbers from 27 in 2014 to around 70 today, will look increasingly flawed and unfit for purpose.

Unsurprisingly, the latest developments have given further ammunition to those critics who have long warned it has been far too easy to access the market. And let’s face it, this week’s troubles are nothing new.

As recently as January, Green Star Energy was appointed supplier of last resort (SoLR) for Future Energy’s 10,000 customers following its collapse due to “trading difficulties” – a move which followed Co-op Energy taking on 160,000 GB Energy Supply customers in November 2016 when that small supplier went bust.

While, at the time of going to press, Hudson Energy had been appointed SoLR to NGP’s clients, for Iresa customers there is still no clarity, save that they should simply “sit tight and wait”.

Ofgem’s current review of arrangements that were last substantially revised eight years ago may well be under way, with a consultation due late summer, but improvements can’t come soon enough. Things will need to change rapidly to meet the demands of today’s more dynamic sector and increasing customer engagement.

It must also take the opportunity to ensure it has sufficient tools to do its job better too, including managing market exit in the event of supplier failure.

Increasingly concerned industry voices are challenging the regulator to ensure all providers can demonstrate they are robust enough to survive and deliver on their promises to consumers – regardless of the risk factors, such as rising prices, outside of their control.

If we are to see the “better functioning retail market” Ofgem advocates and a licensing regime that really protects all energy customers, then seriously tougher entry rules now look inevitable.