From January 2022, energy companies will face more robust financial checks. After a host of energy companies collapsed in 2021, the energy regulator Ofgem has announced that bosses of firms will now undergo more stringent vetting. On top of this, stress tests will be applied to firms in order to ensure inappropriate risks are not passed onto customers.
This year alone, more than 20 suppliers have collapsed following a spike in wholesale prices. Although the majority of these suppliers were only small, large suppliers like Bulb (who had 1.7 million customers) were also placed into special administration. Since the start of the pandemic, nearly four million households have seen their supplier fail.
As well as testing suppliers more stringently, Ofgem has also announced that it is beginning consultation on the way that the energy price cap will be calculated in the future. Although the price cap is designed to protect customers that haven’t switched, many of the suppliers that went bust this year highlighted the cap as a major reason for their downfall.
Speaking about the announcement, Ofgem chief executive Jonathan Brearley said “I am setting out clear action so that we have robust stress testing for suppliers so they can't pass inappropriate risk to consumers.
“Our priority has been, and will always be, to act in the best interests of energy consumers. The months ahead will be difficult for many, and we are working with the government and energy companies to mitigate the impact as much as we can, particularly for the most vulnerable households.”
From next year, if a financial stress test shows a weakness in a company, then an improvement plan will be drawn up by the regulator. On top of this, Ofgem is also consulting on whether to block firms from taking on new customers once they hit certain milestones - such as 50,000 and 200,000 accounts - until it is happy with their balance sheet strength.
How tariffs are offered could also change
In 2022, it appears inevitable that customers will be forced to pay more for their energy bills. However, the way that tariffs are offered in the longer-term may also be about to change.
Again, Ofgem is consulting on these measures, but one of the new options includes customers being tied in to a standard tariff for six months, like a fixed term mortgage. If a customer then leaves this tariff early, they will be charged an exit fee. The argument for this is that the supplier and their remaining customers will not be left to pick up the cost of another customer’s departure.
Other suggestions include forcing companies to offer the same price to existing customers as they do to new customers. A similar rule is being introduced for home and motor insurance in January.
On top of this, the price cap may also be reviewed every three months, rather than the current six. Alternatively, an interim price cap may be introduced if market conditions change dramatically.
Dealing with rising energy bills this winter
Sadly, this winter Brits will be forced to pay more for their energy than ever before. Unfortunately, you also currently cannot run an energy comparison and switch supplier. This is because the best energy deals available from Britain’s best energy suppliers cannot beat the price cap.
However, although almost a third of households are braced for a tight Christmas due to the rising cost of living, there are several simple steps you can take to reduce your bills. On top of this, you can also use your heating more efficiently and apply for help with your bills in order to keep costs as low as possible.
