Ofgem’s safety net proposals ‘should have the big six scared’

Proposals from Ofgem to introduce a ‘safety net’ for consumers’ credit balances “should have the big six scared”, as they will likely encourage more consumers to switch to smaller suppliers, according to price comparison site Gocompare.

The regulator set out proposals earlier this week to introduce a safety net for consumers in the event that their supplier goes out of business, to protect any credit on their account. Ofgem would also appoint a supplier it considered could best protect the consumer’s credit balance.

Gocompare director of money, life and utilities Tom Lewis welcomed the proposals, saying: “Historically, one of the few barriers to consumers jumping ship to a challenger energy company is the level of uncertainty around moving to a less-known brand and the security in doing so.

“As such, Ofgem’s proposal to introduce protection to reassure customers that their in-credit balance will be safeguarded in the very unlikely event their supplier becomes insolvent should have the big six scared.”

The comparison site said small suppliers are becoming increasingly popular for customers looking to switch, and claimed that 58 per cent of switchers have moved away from the big six so far in 2016.

“Smaller energy providers are consistently offering better deals than their larger counterparts, and hopefully these proposals would give customers peace of mind when shopping around for a new supplier,” Lewis added.

Ofgem’s consultation is expected to close 29 July 2016.