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Supplier Licensing Review: What you need to know

1st Oct, 2020

Recently, the number of suppliers exiting the energy market has increased. These exits can be disruptive to consumers and can impose costs on remaining suppliers.

Ofgem has reviewed supplier licensing arrangements when suppliers exit the market to ensure high standards are promoted amongst all suppliers to minimise consumer and market disruption.

Last year, Ofgem reviewed proposals designed to promote responsible supplier risk management, improve supplier governance and accountability and enhance its market oversight. In June 2020  Ofgem published its final proposals designed to drive up standards across the energy retail sector.

What does this mean for suppliers?

The proposals introduce a combination of new principles-based and prescriptive requirements that suppliers will need to prepare for.

Ofgem has put a strong focus on increased supplier accountability, ensuring suppliers have appropriate processes and controls in place and proposed additional supplier assessments made by the regulator.

Key proposals are outlined below:

Promoting more responsible risk management

  • New principles-based requirements to minimise costs that could be mutualised if a supplier were to exit the market and ensure suppliers have robust capabilities, systems and processes in place.
  • Suppliers must undergo “milestone assessments” providing information to Ofgem when they reach 50,000 and 200,000 domestic customers to evidence their readiness for growth and ability to meet regulatory obligations.
  • Suppliers may be required to undergo additional assessments if Ofgem has specific concerns over a supplier’s financials.

Improved governance and increased accountability

  • Suppliers must ensure individuals with significant influence in the business are fit and proper to occupy their role.
  • Suppliers must be open and cooperative with the regulator.

Increased market oversight

  • Suppliers must produce and maintain “Customer Supply Continuity Plans” setting out clear terms of their market exit to protect customers and minimise wider market impacts.
  • Suppliers may be required to undertake independent audits if they show continued poor performance or are unable to provide adequate information to Ofgem when requested.
  • Suppliers must report changes in control of the business to Ofgem.

 

How can Gemserv help?

These proposals introduce changes which suppliers will need to quickly prepare for. Suppliers will need to; ensure they understand the new obligations; have the capability to provide information to Ofgem when required and develop/update procedures to ensure compliance.

Gemserv’s regulatory services consultants have extensive experience in supporting suppliers through regulatory change and implementing and assuring new processes.

For more information on the current proposals from Ofgem and how Gemserv can help you, please contact our team by emailing regulation@gemserv.com.

You can also find out more about our regulatory work and services by clicking the below link:

 

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