ENSEK | Supplier Licence Review Update

Supplier Licencing Review - Phase 3

The third phase of the supplier licensing review is in flight with a Statutory Consultation currently open which closes on the 20^th August 2020.

These proposals require stronger financial and risk management from suppliers to reduce the impact of supplier failure. Progress will be made on these proposals in the Autumn with new rules coming into force this Winter. Read Ofgem's consultation summary here.

The final proposals are:

1. Promoting more responsible risk management:

A requirement for suppliers to take action in order to reduce costs which could be mutualised in the future. This will ensure suppliers are managing their finances effectively and are proactively managing the risk of leaving costs to be mutualised. This principle will allow Ofgem to take the necessary action and intervention where suppliers are unable to manage risks effectively.

Introduction of new supplier checkpoints, based on customer numbers and financial compliance indicators, to allow Ofgem to question and evaluate suppliers’ ability to meet their regulatory obligations.

This is a principle-based requirement to make sure suppliers have the adequate operational capability for better risk management.

2. Improved governance and increased accountability

Suppliers must ensure relevant individuals within their business who have significant influence are fit and proper for their role. The introduction of a new principle-based requirement for suppliers to be open and co-operative with the regulator.

3. Increased market oversight

Upon request from Ofgem, suppliers are to undertake an independent audit of their financial position and customer services systems and processes; ensure customers are protected and reduce wider market impacts in the event of a market exit, and report any control of business changes to Ofgem.

These proposals are aimed at reducing the impact when suppliers exit the market in an unruly manner.

Deadline for feedback - 20/08

The deadline for feedback or any responses on this consultation is set for the 20th of August 2020 with a decision expected in autumn. The consultation document can be found here and if you should more information on this or any other Ofgem consultation with one of us please contact the ENSEK team.