Standard content for Members only
To continue reading this article, please login to your Utility Week account, Start 14 day trial or Become a member.
If your organisation already has a corporate membership and you haven’t activated it simply follow the register link below. Check here.
Ofgem has proposed a series of tweaks to the supplier of last resort arrangements, as the first step of a review into the current licensing regime which it outlined earlier this week.
The main changes proposed by the regulator concern the ability of an appointed supplier to recover the costs of honouring any credit balances customers may hold.
In an open letter, Ofgem head of industry codes and licensing, Lesley Nugent, wrote that the present arrangements do not allow appointees to claim costs for customers who had switched away from the failing supplier shortly before it went under. He said they should be able to recoup these costs in future.
However, Nugent also proposed licensing amendments to clarify, for the avoidance of doubt, that the costs which a supplier of last resort may recover are “limited to the actual amounts owed to customers by the failed supplier, taking into account any unbilled gas and electricity consumption”.
The letter reiterated that Ofgem would prefer a backstop supplier to avoid making a claim at all, but added, if they do so, they should minimise the amount by first recovering costs from the failed supplier’s liquidation whenever possible.
Accordingly, the regulator suggested extending the period during which a supplier of last resort is able to make a claim to enable them to recoup as much costs as possible through the liquidation process.
Under the current licence conditions, a last resort supply direction ceases to have effect within six months. Once it has ended, the appointed supplier has six months in which to file a claim.
The licence conditions also state that a supplier of last resort can recover costs from any distribution network which had customers of the failed supplier within its licence areas.
Nugent said Ofgem plans to remove this stipulation on the basis it is “not necessary or in the interests of consumers as a whole to link recovery of supplier of last resort related costs to the geographic area where customers of a failed supplier happened to be located”.
“This change should mean that the cost of supplier of last resort processes are borne more evenly across the industry and that no market participant is subject to a disproportionate charge based on geographic region,” he added.
Ofgem is now consulting on the proposals. The deadline for responses is 11 July 2018.
Please login or Register to leave a comment.